[Federal Register Volume 75, Number 223 (Friday, November 19, 2010)]
[Proposed Rules]
[Pages 70888-70894]
[FR Doc No: 2010-29237]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R08-OAR-2010-0909; FRL-9228-9]

Finding of Substantial Inadequacy of Implementation Plan; Call
for Utah State Implementation Plan Revision

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: Pursuant to sections 110(a)(2)(H) and 110(k)(5) of the Clean
Air Act, EPA is proposing to find that the Utah State Implementation
Plan (SIP) is substantially inadequate to attain or maintain the
national ambient air quality standards or to otherwise comply with the
requirements of the Clean Air Act. Specifically, the SIP includes Utah
rule R307-107, which exempts emissions during unavoidable breakdowns
from compliance with emission limitations. This rule undermines EPA's,
Utah's, and citizens' ability to enforce emission limitations that have
been relied on to ensure attainment or maintenance of the national
ambient air quality standards or meet other Clean Air Act requirements.
If EPA finalizes this proposed finding of substantial inadequacy, Utah
will be required to revise its SIP to correct this deficiency within 12
months of the effective date of our final rule. If EPA finds that Utah
has failed to submit a complete SIP revision as required by a final
rule or if EPA disapproves such a revision, such finding or disapproval
would trigger clocks for mandatory sanctions and an obligation for EPA
to impose a Federal Implementation Plan. EPA is also proposing that if
EPA makes such a finding or disapproval, sanctions would apply
consistent with 40 CFR 52.31, such that the offset sanction would apply
18 months after such finding or disapproval and highway funding
restrictions would apply six months later unless EPA first takes action
to stay the imposition of the sanctions or to stop the sanctions clock
based on the State curing the SIP deficiencies. EPA is also requesting
comment on whether EPA should exercise its discretionary authority
under the Clean Air Act to impose highway funding restrictions in all
areas of the State, not just in nonattainment areas.

DATES: Comments must be received on or before December 20, 2010.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R08-
OAR-2010-0909, by one of the following methods:
     http://www.regulations.gov. Follow the on-line
instructions for submitting comments.
     E-mail<EMAIL_ADDRESS>     Mail: Callie A. Videtich, Director, Air Program,
Environmental Protection Agency, Region 8, Mailcode 8P-AR, 1595 Wynkoop
Street, Denver, Colorado 80202-1129.
     Fax:<PHONE_NUMBER> (please alert the individual listed in
FOR FURTHER INFORMATION CONTACT if you are faxing comments).
     Hand Delivery: Callie A. Videtich, Director, Air Program,
Environmental Protection Agency (EPA), Region 8, Mailcode 8P-AR, 1595
Wynkoop Street, Denver, Colorado 80202-1129. Such deliveries are only
accepted Monday through Friday, 8 a.m. to 4:30 p.m., excluding Federal
holidays. Special arrangements should be made for deliveries of boxed
information.
    Instructions: Direct your comments to Docket ID No. EPA-R08-OAR-
2010-0909. 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'' systems, 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. For additional
information about EPA's public docket visit the EPA Docket Center
homepage at http://www.epa.gov/epahome/dockets.htm. For additional
instructions on submitting comments, go to Section I. General
Information of the SUPPLEMENTARY INFORMATION section of this document.
    Docket: All documents in the docket are listed in the http://www.regulations.gov index. Although listed in the index, some
information is not publicly available, e.g., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, will be publicly available only in hard copy.
Publicly available docket materials are available either electronically
in http://www.regulations.gov or in hard copy at the Air Program,
Environmental Protection Agency, Region 8, 1595 Wynkoop Street, Denver,
Colorado 80202-1129. EPA requests that if at all possible, you contact
the individual listed in the FOR FURTHER INFORMATION CONTACT section to
view the hard copy of the docket. You may view the hard copy of the
docket Monday through Friday, 8 a.m. to 4 p.m., excluding Federal
holidays.

FOR FURTHER INFORMATION CONTACT: Tim Russ, Air Program, Mailcode 8P-AR,
Environmental Protection Agency, Region 8, 1595 Wynkoop Street, Denver,
Colorado 80202-1129,<PHONE_NUMBER>, or<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Definitions

    For the purpose of this document, the following definitions apply:
    (i) The word Act or initials CAA mean or refer to the Clean Air
Act, unless the context indicates otherwise.
    (ii) The words EPA, we, us or our mean or refer to the United
States Environmental Protection Agency.
    (iii) The initials NAAQS mean national ambient air quality
standard.
    (iv) The initials SIP mean or refer to State Implementation Plan.
    (v) The words State or Utah mean the State of Utah, unless the
context indicates otherwise.

Table of Contents

I. General Information
II. Background
III. Why is EPA proposing a SIP call?
    A. Deficiencies in R307-107-1
    B. Deficiencies in R307-107-2
    C. Conclusion
IV. What happens if EPA issues a final SIP call and the State of
Utah does not submit a complete SIP revision that responds to the
SIP call or if EPA disapproves a SIP revision that responds to the
SIP call?
V. Proposed Action
VI. Statutory and Executive Order Reviews

I. General Information

What should I consider as I prepare my comments for EPA?

    1. Submitting CBI. Do not submit this information to EPA through
http://www.regulations.gov or e-mail. Clearly mark the part or all of
the information that you claim to be CBI. For CBI information in a disk
or CD-ROM that you mail to EPA, mark the outside of the disk or CD-ROM
as CBI and then identify electronically within the disk or CD-ROM the
specific information that is claimed as CBI. In addition to one
complete version of the comment that includes information claimed as
CBI, a copy of the comment that does not contain the information
claimed as CBI must be submitted for inclusion in the public docket.
Information so marked will not be disclosed except in accordance with
procedures set forth in 40 CFR part 2.
    2. Tips for Preparing Your Comments. When submitting comments,
remember to:
    a. Identify the rulemaking by docket number and other identifying
information (subject heading, Federal Register date and page number).
    b. Follow directions--The agency may ask you to respond to specific
questions or organize comments by referencing a Code of Federal
Regulations (CFR) part or section number.
    c. Explain why you agree or disagree; suggest alternatives and
substitute language for your requested changes.
    d. Describe any assumptions and provide any technical information
and/or data that you used.
    e. If you estimate potential costs or burdens, explain how you
arrived at your estimate in sufficient detail to allow for it to be
reproduced.
    f. Provide specific examples to illustrate your concerns, and
suggest alternatives.
    g. Explain your views as clearly as possible, avoiding the use of
profanity or personal threats.
    h. Make sure to submit your comments by the comment period deadline
identified.

II. Background

    On September 20, 1999, Assistant Administrator for Enforcement and
Compliance Assurance, Steven A. Herman, and Assistant Administrator for
Air and Radiation, Robert Perciasepe, issued the EPA's most recent
policy on appropriate State Implementation Plan (SIP) provisions
addressing excess emissions during periods of startup, shutdown and
malfunction (SSM). ``State Implementation Plans: Policy Regarding
Excess Emissions During Malfunctions, Startup and Shutdown'' (1999
Policy). The 1999 Policy indicated that it was expanding on and
clarifying two previous policies issued in 1982 and 1983 by then
Assistant Administrator for Air, Noise and Radiation Kathleen Bennett
(``1982 Policy'' and ``1983 Policy'').
    In the 1982 and 1983 Policies, Assistant Administrator Bennett
enunciated the Agency's position that SIPs should not be approved if
they include exemptions for excess emissions during malfunction
events.\1\ These policies reflect the Agency's interpretation that
broad exemptions from compliance with emission limitations during
periods of malfunction prevent a SIP from adequately ensuring
attainment and maintenance of national ambient air quality standards
(NAAQS). For purposes of demonstrating attainment and maintenance,
states rely on assumed compliance with emission limitations. See, e.g.,
Clean Air Act (CAA) sections 110(a)(2)(A) and (C); 40 CFR 51.112; Train
v. NRDC, 421 U.S.

60, 78-79 (1975). Thus, the 1982 and 1983 Policies indicated that,
because SIPs must provide for attainment and maintenance of the NAAQS,
any SIP provisions addressing malfunctions must be narrowly drawn and
should not provide a blanket exemption from compliance with emission
limitations; all periods during which emissions exceed emission
limitations (``excess emissions'') should constitute violations under
the SIP.
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    \1\ As indicated above, the 1982, 1983, and 1999 Policies also
address excess emissions provisions for startup and shutdown events.
However, because our proposed action only addresses a malfunction
provision--Utah's unavoidable breakdown rule--we are not including
any further discussion of the Policies as they relate to startup and
shutdown.
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    The 1982 and 1983 Policies stated that EPA could approve SIP
revisions that incorporated an enforcement discretion approach as
described in the Policies. This enforcement discretion approach
envisioned commencement of a proceeding to notify the source of its
violation and a demonstration by the source that the excess emissions,
``though constituting a violation,'' were due to an unavoidable
malfunction. Following the proceeding and consideration of specific
criteria, the state agency would decide whether to pursue an
enforcement action. The 1982 and 1983 Policies also advised that the
state could choose not to include in the SIP any provision on
malfunctions, which reflected the fact that the CAA does not require
states to include in SIPs any form of relief for violations caused by
malfunctions.
    EPA understood that some malfunctions are unavoidable: ``Generally,
EPA agrees that the imposition of a penalty for sudden and unavoidable
malfunctions caused by circumstances entirely beyond the control of the
owner and/or operator is not appropriate.'' (1982 and 1983 Policies).
However, EPA was also mindful of its duty under the CAA to protect the
NAAQS:

    ``The rationale for establishing these emissions as violations,
as opposed to granting automatic exemptions, is that SIPs are
ambient-based standards and any emissions above the allowable may
cause or contribute to violations of the national ambient air
quality standards. Without clear definitions and limitations, these
automatic exemption provisions could effectively shield excess
emissions arising from poor operation and maintenance or design,
thus precluding attainment. Additionally, by establishing an
enforcement discretion approach and by requiring the source to
demonstrate the existence of an unavoidable malfunction on the
source, good maintenance procedures are indirectly encouraged.''
(1982 Policy.) \2\
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    \2\ Even prior to the issuance of the 1982 and 1983 Policies, it
was our interpretation that all excess emissions, regardless of
cause, should be treated as violations so as to provide sources with
the incentive to properly design their facilities in the first
instance and to improve their operation and maintenance practices
over time. See, e.g., 42 FR 58171 (November 8, 1977).

    The 1999 Policy reiterated EPA's interpretation that all periods of
excess emissions should be considered violations. However, the 1999
Policy reflected our interpretation that a state could include a
narrowly crafted affirmative defense provision in the SIP as an
alternative to an enforcement discretion provision. Under this
approach, a SIP could provide an affirmative defense to an enforcement
action for penalties, but not to an action for injunctive relief. The
Agency explained that because periods of excess emissions could
undermine attainment and maintenance of the NAAQS and protection of
prevention of significant deterioration (PSD) increments, an
affirmative defense to an action for injunctive relief would not be
appropriate.\3\
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    \3\ In a 2009 decision, the United States Court of Appeals for
the Tenth Circuit held that the policy was a ``reasonable
interpretation of the Clean Air Act.'' Arizona Public Service
Company v. EPA, 562 F.3d 1116, 1129 (10th Cir. 2009). See also
Michigan Dept. of Environmental Quality v. EPA, 230 F.3d 181 (6th
Cir. 2000).
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    We also indicated in the 1999 Policy that we would not approve a
rule that would bar EPA or citizen enforcement based on a state's
decision to exercise its discretion not to pursue an enforcement
action. EPA explained that such a rule would be inconsistent with the
regulatory scheme established in Title I of the CAA.
    Finally, the 1999 Policy noted that some SIPs had been approved
that appeared to be in conflict with EPA's SSM policies. The Policy
indicated that EPA Regional Offices should work with the states to
ensure SIPs were consistent with EPA's interpretation of the Act's
requirements.
    Since the 1999 Policy was issued, EPA Region VIII has worked with
states within the Region to ensure that their SIPs are consistent with
EPA's interpretation of the Act as set forth in the 1982, 1983, and
1999 Policies.\4\ Shortly after the 1999 Policy was issued, we advised
Utah that its unavoidable breakdown rule was inconsistent with the CAA,
and since that time, we have asked Utah several times to revise the
rule. Among other things, the rule provides that ``emissions resulting
from an unavoidable breakdown will not be deemed a violation * * * ''
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    \4\ For example, at our request, the State of Colorado revised
its SIP provisions for SSM. We approved revised provisions in 2006
(71 FR 8958, February 22, 2006) and 2008 (73 FR 45879, August 7,
2008). At our request, the State of Wyoming revised its SIP
provision for malfunctions. We approved the revised provision on
April 16, 2010 (75 FR 19886). At our request, the State of North
Dakota revised its SIP provision for malfunctions and submitted the
revised provision to us on April 6, 2009. That provision is modeled
on the Wyoming provision, and we intend to propose action on it
shortly.
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    Some version of the Utah unavoidable breakdown rule has been in the
SIP for many years. In 1980, EPA approved a variation of the current
Utah unavoidable breakdown rule. In the proposed rulemaking preamble,
EPA stated that it could ``not fully approve Regulation 4.7 because it
exempts certain excess emissions from being violations of the Air
Conservation Regulations,'' but then proposed to approve Utah's
malfunction procedures because any exemptions granted by the Utah
Executive Secretary ``are not applicable as a matter of federal law.''
44 FR 28688, 28691 (May 16, 1979). EPA's final approval of the
regulation mirrored this concept. 45 FR 10761, 10763 (February 19,
1980). However, thirty years later, it is not clear how EPA reached the
conclusion that exemptions granted by Utah would not apply as a matter
of federal law or whether a court would honor EPA's interpretation; the
Utah rule itself makes no reference to a reservation of federal
authority. Instead, the rule merely states that information submitted
by a source regarding a breakdown event would be ``used by the
executive secretary in determining whether a violation has occurred
and/or the need of further enforcement action.''
    EPA approved a revised version of the rule in 1994 with no preamble
discussion, except to say that the Utah air rules had been renumbered
and new requirements had been added (59 FR 35036, July 8, 1994; 40 CFR
52.2320(c)(25)(i)(A)). The key aspects of the unavoidable breakdown
rule remained the same.
    Subsequently, Utah again re-numbered its entire SIP regulations,
and EPA approved the re-numbered regulations, including the re-numbered
unavoidable breakdown rule, to conform the federally-approved SIP to
the numbering of Utah's regulations. (70 FR 59681 (October 13, 2005).)
EPA did not consider the substance of the unavoidable breakdown rule in
that action. Instead, EPA indicated that it was only approving the
renumbering and that attempts to address problems in the rules were
ongoing:

    ``By this action, EPA has reviewed the Utah Department of Air
Quality's (UDAQ) SIP submittals and found that these SIP submittals
only renumber and restructure UDAQ's rules. EPA has not reviewed the
substance of these rules as part of this action; EPA approved these
state rules into the SIP in previous rulemakings. The EPA is now
merely approving the renumbering system submitted by the State. The
current version of UDAQ's rules does not contain substantive changes
from the prior codification that we

approved into the SIP. EPA acknowledges that there are ongoing
discussions with Utah to address EPA's concerns with some rule
language that EPA previously approved into the Utah SIP. In an April
18, 2002 letter from Richard Sprott, Director of Utah's Division of
Air Quality, to Richard Long, Director of the Air and Radiation
Program in EPA Region 8, UDAQ committed to work with us to address
our concerns with the Utah SIP. Because the SIP submittals only
restructure and renumber the existing SIP-approved regulations,
contain no substantive changes, and UDAQ has committed to address
EPA's concerns, we believe it is appropriate to propose to approve
the submittal. Approving the restructured and renumbered Utah rules
into the SIP will also facilitate future discussions on the rules.
EPA will continue to require the State to correct any rule
deficiencies despite EPA's approval of this recodification.'' (70 FR
at 59683)

    Over the years Utah personnel acknowledged that the unavoidable
breakdown rule should be revised and committed to do so. For example,
in a January 17, 2001 letter to EPA, Rick Sprott, then the Executive
Director of the Utah Division of Air Quality (UDAQ), wrote the
following:

    ``With respect to EPA's concern with the breakdown rule
currently approved into Utah's SIP, UDAQ agrees that the rule would
benefit from clarification.''

Later, in an April 18, 2002 letter,\5\ Mr. Sprott wrote the
following:

    \5\ April 18, 2002 letter from Rick Sprott, UDAQ to Richard
Long, EPA referred to as 15-point commitment letter.
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    ``The Utah Division of Air Quality commits to work with EPA in
good faith to develop approvable SIP revisions, which address the
following issues:
    * * *
    8. Unavoidable breakdown rules and consistency with the EPA
September 20, 1999 policy regarding such breakdowns.''

    In 2004, UDAQ staff drafted replacement rule language for the
breakdown rule, consulted with EPA and other stakeholders, and
initiated the State's public process for SIP revisions. EPA provided
detailed comments regarding draft rule language and in January 2005
traveled to Utah to provide a detailed presentation to UDAQ and
industry stakeholders regarding EPA's interpretations of the CAA and
concerns regarding UDAQ's proposed replacement rule language.
    Following the January 2005 meeting, Fred Nelson of the Utah
Attorney General's Office prepared another draft of possible
replacement rule language, which he shared with EPA and industry
representatives. In May 2005, in an attempt to ensure that any rule
revision could ultimately be approved by EPA, EPA provided specific
comments and suggestions to Mr. Nelson regarding this draft. However,
UDAQ did not pursue further rulemaking action at that time.
    During the August 2, 2006 midyear review between UDAQ and EPA, the
unavoidable breakdown rule was again discussed. Mr. Sprott indicated
that he did not want to pursue further action on the unavoidable
breakdown rule given the disagreement between Utah industry and EPA.
However, he said he was aware that Colorado was in the process of
revising its malfunction rule, that he would be happy to benefit from
the Colorado process, and that if it concluded successfully, he would
lead the effort to adopt a new rule in Utah. Mr. Sprott also said that
while he wanted to complete a rule revision through a cooperative
process, if it couldn't be done that way, EPA should do a SIP call.
Although Colorado subsequently adopted a revised malfunction rule and
we approved it into the SIP without challenge (73 FR 45879, August 7,
2008), we are unaware of any further steps taken by Utah to revise its
unavoidable breakdown rule.
    To assure that a state's SIP provides for attainment and
maintenance of the NAAQS, and compliance with other CAA requirements,
sections 110(a)(2)(H) and 110(k)(5) of the CAA authorize EPA to find
that a SIP is substantially inadequate to attain or maintain a NAAQS,
or comply with other CAA requirements, and to require (``call for'')
the state to submit, within a specified time period, a SIP revision to
correct the inadequacy. This CAA requirement for a SIP revision is
known as a ``SIP call.'' The CAA authorizes EPA to allow a state up to
18 months to respond to a SIP call.
    On September 3, 2009, WildEarth Guardians (WEG) filed a complaint
against EPA in the U.S. District Court for the District of Colorado
(Civil Action No. 09-cv-02109-MSK-KLM) seeking, among other things, an
injunction requiring EPA to issue a SIP call to Utah to revise the
unavoidable breakdown rule. On November 23, 2009, we entered into a
Consent Decree with WEG that requires us to sign a notice of final
rulemaking action by February 28, 2011. In that final rulemaking action
we must determine whether the Utah breakdown provision (Utah
Regulations 307-107-1 through 307-107-5) renders the Utah SIP
``substantially inadequate'' within the meaning of section 110(k)(5) of
the CAA, 42 U.S.C. 7410(k)(5), and, if EPA determines that the SIP is
substantially inadequate, require the State to revise the SIP as it
relates to the Utah breakdown provision. We intend to meet the
requirements of the Consent Decree through the rulemaking action we are
initiating today.

III. Why is EPA proposing a SIP call?

    Utah rule R307-107 contains various provisions that are
inconsistent with EPA's interpretations regarding the appropriate
treatment of malfunction events in SIPs and which render the Utah SIP
substantially inadequate. As a result, we are calling for a SIP
revision.

A. Deficiencies in R307-107-1

    R307-107-1 indicates it applies to all regulated pollutants
including those for which there are NAAQS and states that ``emissions
resulting from unavoidable breakdown will not be deemed a violation of
these regulations.'' As described above, our interpretation of the CAA
as expressed in our various policy statements since the early 1980s is
that SIP provisions may not provide that periods of excess emissions
are not violations.
    We believe the Utah rule's broad exemption undermines the ability
to protect the NAAQS, PSD increments, and visibility through
enforcement of emission limits contained in the SIP. The Utah SIP
contains generic emission limits that help areas maintain the NAAQS as
well as emission limits specifically modeled and relied on to bring
areas not attaining the NAAQS into attainment. See, e.g., Utah rule
R307-201 (``General Emission Standards'') and Section IX.H.1 of the
Utah SIP (contains emission limits for the Utah County PM10
nonattainment area SIP). Because the NAAQS are not directly enforceable
against individual sources,\6\ SIPs rely on the adoption and
enforcement of these generic and specific emission limits to attain and
maintain the NAAQS, as well as to protect PSD increments and meet other
CAA requirements, such as protection of visibility in Class I areas.
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    \6\ See, e.g., Coalition Against Columbus Ctr. v. New York, 967
F.2d 764, 769 (2d Cir. 1992); League to Save Lake Tahoe, Inc. v.
Trounday, 598 F.2d 1164, 1173 (9th Cir. 1979); 57 FR 32276, July 21,
1992.
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    In the case of an unavoidable breakdown, the rule's exemption
eliminates any opportunity to obtain injunctive relief that may be
needed to protect the NAAQS, increments, and visibility. Thus, the rule
impedes the ability to protect public health and the environment.
Furthermore, the rule's exemption reduces a source's incentive to
design, operate, and maintain its facility to meet emission limits at
all times.
    We expect some commenters may assert that we need to show a direct
causal link between unavoidable breakdown excess emissions and specific
threats to or violations of the

NAAQS to conclude that the SIP is substantially inadequate. We do not
agree. It is our interpretation that the fundamental integrity of the
CAA's SIP process and structure are undermined if emission limits
relied on to meet CAA requirements related to protection of public
health and the environment can be violated without potential recourse.
We do not believe we are restricted to issuing SIP calls only after a
violation of the NAAQS has occurred or only where a violation can be
directly linked to specific excess emissions. It is sufficient that
emissions limits to which the unavoidable breakdown exemption applies
have been, are being, and will be relied on to attain and maintain the
NAAQS and meet other CAA requirements.\7\
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    \7\ The U.S. Court of Appeals for the Eleventh Circuit has
recognized that a SIP call under CAA section 110(k)(5) is the
appropriate mechanism for EPA to require a change to an existing SSM
provision in a SIP: ``EPA policy guidance cannot trump the SSM Rule
adopted by Georgia and approved formally by the EPA * * * If the EPA
believes that its current interpretation of the Clean Air Act
requires Georgia to modify its SSM Rule, the EPA should require the
state to revise its SIP to conform to EPA policy'' (citing CAA
section 110(k)(5)).
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    Our interpretation of the CAA is supported by sections 110 and 302
of the CAA. Section 110(a)(2)(A) requires each SIP to include
enforceable emission limitations necessary or appropriate to meet the
CAA's applicable requirements. As noted above, these applicable
requirements include attainment and maintenance of the NAAQS,
prevention of significant deterioration, and improvement and protection
of visibility in national parks and wilderness areas. Section 302(k)
defines emission limitation as a requirement established by a state or
EPA that ``limits the quantity, rate, or concentration of emissions of
air pollutants on a continuous basis.'' (Emphasis added.) Because of
the exemption in R307-107-1, emission limits in the Utah SIP that have
been relied on by the State to demonstrate attainment and maintenance
of the NAAQS and meet other CAA requirements do not limit emissions on
a continuous basis and are not fully enforceable.
    R307-107-1 is also substantially inadequate because it applies to
all regulated pollutants, not just NAAQS pollutants, and because it
indicates that excess emissions from an unavoidable breakdown are not
deemed a violation of ``these regulations.'' ``These regulations''
includes the totality of Utah's air pollution control regulations,
which include the regulations Utah has incorporated by reference to
receive delegation of federal authority--for example, New Source
Performance Standards (NSPS) and National Emission Standards for
Hazardous Air Pollutants (NESHAPS). See Utah rules R307-210 and R307-
214. To the extent any exemptions with respect to malfunctions from
these technology-based standards are warranted, the federal standards
contained in EPA's regulations already specify the appropriate
exemptions. See, e.g., 40 CFR 60.48Da(c). No additional exemptions are
warranted or appropriate. See, e.g., 40 CFR 60.10(a); 40 CFR
63.12(a)(1); and the 1999 Policy, Attachment, page 3. Thus, R307-107-1
is substantially inadequate because it improperly provides an exemption
not contained in and not sanctioned by the delegated federal standards.
    Our interpretation, as it applies to both technology-based
standards and SIP limits, is further supported by a 2008 U.S. Court of
Appeals decision that vacated EPA's general malfunction exemption from
CAA section 112(d) maximum achievable control technology (MACT)
standards. Sierra Club v. EPA, 551 F.3d 1019 (DC Cir. 2008), cert.
denied. The court vacated the exemption because it was inconsistent
with the CAA's requirement that emission standards--such as the 112(d)
MACT standards--must apply continuously, as expressed in section 302(k)
of the CAA. The court specifically held that a regulatory provision
establishing a general duty to minimize hazardous air pollutant (HAP)
emissions during malfunctions was not an emission standard under CAA
section 112. Although the decision addressed the HAP program and not
the SIP program, it carries significant weight for the SIP program as
well because section 302(k) is equally relevant for the SIP program.
R307-107-1's broad malfunction exemption from ``these regulations'' is
inconsistent with section 302(k) as interpreted by the Court in Sierra
Club.
    As referenced in R307-107-1, ``these regulations'' would also
include Utah's PSD and nonattainment major new source review (NSR)
requirements. This means a source could use the provisions of R307-107
to claim an exemption from best available control technology (BACT) or
lowest achievable emission rate (LAER) limits in a major source permit
for excess emissions resulting from an unavoidable breakdown. We have
consistently interpreted the Act to not allow for outright exemptions
from BACT limits, and the same logic applies to LAER limits. See, e.g.,
1977 memorandum entitled ``Contingency Plan for FGD Systems During
Downtime as a Function of PSD,'' from Edward E. Reich to G.T. Helms and
January 28, 1993 memorandum entitled ``Automatic or Blanket Exemptions
for Excess Emissions During Startup and Shutdowns under PSD,'' from
John B. Rasnic to Linda M. Murphy. As noted, in order to ensure non-
degradation of air quality at all times under the PSD program and
protection of the NAAQS at all times, it is necessary for a source to
comply with its permit limits at all times. This is another reason
R307-107's exemption renders the Utah SIP substantially inadequate.

B. Deficiencies in R307-107-2

    R307-107-2 requires the source to submit information regarding an
unavoidable breakdown to the executive secretary of Utah's Air Quality
Board (UAQB) and indicates that the information ``shall be used by the
executive secretary in determining whether a violation has occurred
and/or the need of further enforcement action.'' In other words, the
executive secretary shall determine whether the excess emissions were
caused by an unavoidable breakdown and, thus, whether the excess
emissions constitute a violation or not. This rule provision appears to
give the executive secretary exclusive authority to determine whether
excess emissions constitute a violation.\8\ We believe this is
inconsistent with the enforcement structure contemplated by the CAA.
Specifically, the CAA provides authority to enforce violations of SIP
and other CAA emission limits to EPA and citizens as well as to the
states. Thus, the CAA provides EPA and citizens with authority to
pursue a violation even if a state chooses not to. See sections 113 and
304 of the CAA. It is our interpretation, expressed in our 1999 Policy,
that SIP provisions that give exclusive authority to a state to
determine whether an enforcement action can be pursued for an
exceedance of an emission limit are inconsistent

with the CAA's regulatory scheme. EPA and citizens, and any court in
which they seek to file an enforcement claim, must retain the authority
to independently evaluate whether a source's exceedance of an emission
limit warrants enforcement action. Because a court could interpret
section R307-107-2 as undermining the ability of EPA and citizens to
independently exercise enforcement discretion granted by the CAA, it is
substantially inadequate to comply with CAA requirements related to
enforcement. Because it undermines the envisioned enforcement
structure, attainment and maintenance of the NAAQS and compliance with
other CAA requirements related to PSD, visibility, NSPS, and NESHAPS is
less certain. Potential EPA and citizen enforcement provides an
important safeguard in the event a state lacks resources or appropriate
intention to enforce CAA violations. Thus, R307-107-2 renders the SIP
substantially inadequate to attain or maintain the NAAQS or otherwise
comply with the CAA.
---------------------------------------------------------------------------

    \8\ As we noted earlier, in a 1980 approval of a predecessor to
the current unavoidable breakdown rule, EPA indicated that EPA might
not approve exemptions granted by the State and that the State's
exemption would not apply as a matter of federal law. Thirty years
later, we are not sanguine that a court would uphold our
interpretation, or that five years from now, anyone will remember
that interpretation. See, e.g., U.S. v. Ford Motor Co., 736 F.Supp.
1539 (W.D. Mo. 1990) and U.S. v General Motors Corp., 702 F.Supp.
133 (N.D. Texas 1988) (EPA could not pursue enforcement of SIP
emission limits where states had approved alternative limits under
procedures EPA had approved into the SIP.) While we do not agree
with the holdings of these cases, we think the reasonable course is
to eliminate any uncertainty about reserved enforcement authority by
requiring the State to revise or remove the unavoidable breakdown
rule from the SIP.
---------------------------------------------------------------------------

C. Conclusion

    For the reasons stated above, EPA is proposing to find, pursuant to
sections 110(a)(2)(H) and 110(k)(5) of the CAA, that the Utah SIP is
substantially inadequate to attain or maintain the NAAQS or to
otherwise comply with the requirements of the CAA. Utah rule R307-107
improperly undermines EPA's, Utah's, and citizens' ability to enforce
emission limitations that have been relied on in the SIP to ensure
attainment and maintenance of the NAAQS or meet other CAA requirements.
Pursuant to sections 110(a)(2)(H) and 110(k)(5) of the CAA, we are
proposing to call for Utah to remove R307-107 from the SIP or revise it
to be consistent with CAA requirements.
    We are proposing that Utah must respond to our SIP call within 12
months of the effective date of a final rule issuing a SIP call. We
think this is a reasonable amount of time for several reasons. First,
Utah has been aware of our concerns for years. Utah previously
initiated the State rulemaking process to address the SIP deficiencies
but dropped its efforts when it couldn't achieve consensus. Second,
industry and WildEarth Guardians' predecessor had extensive involvement
in the development of the Colorado malfunction rule, which, as noted
above, we approved in 2008. The Colorado malfunction rule is readily
available online, and use of the Colorado rule as a template would give
the UAQB a substantial head start in addressing the SIP deficiencies.
Other examples of provisions that have been approved or promulgated by
EPA for areas within the Region are also available. See, e.g., https://
yosemite.epa.gov/R8/R8Sips.nsf/641057911f6bd13987256b5f0054f380/
722dcc2462e7856a87256ef3005f6d4f/$FILE/Ch%201%20Sect%205.pdf (Wyoming
air rules, Chapter 1, Section 5, approved at 75 FR 19886, April 16,
2010); 73 FR 21418, 21464, April 21, 2008. Third, another option to
address the deficiencies is to simply remove R307-107 from the SIP.
Under this option, no time would be needed to develop replacement SIP
rule language.

IV. What happens if EPA issues a final SIP call and the State of Utah
does not submit a complete SIP revision that responds to the SIP call
or if EPA disapproves a SIP revision that responds to the SIP call?

    If Utah fails to submit a complete SIP revision that responds to a
final SIP call, CAA section 179(a) provides for EPA to issue a finding
of State failure. Such a finding starts mandatory 18-month and 24-month
sanctions clocks and a 24-month clock for promulgation of a federal
implementation plan (FIP) by EPA. The two sanctions that apply under
CAA section 179(b) are the 2-to-1 emission offset requirement for all
new and modified major sources subject to the nonattainment new source
review program and restrictions on highway funding. However, section
179 leaves it up to the Administrator to decide the order in which
these sanctions apply. EPA issued an order of sanctions rule in 1994
(59 FR 39832, August 4, 1994, codified at 40 CFR 52.31) but did not
specify the order of sanctions where a state fails to submit or submits
a deficient SIP in response to a SIP call. However, the order of
sanctions specified in that rule (40 CFR 52.31) should apply here for
the same reasons discussed in the preamble to that rule. Thus, if EPA
issues a final SIP call and Utah fails to submit the required SIP
revision, or submits a revision that EPA determines is incomplete or
that EPA disapproves, EPA proposes that the 2-to-1 emission offset
requirement will apply for all new sources subject to the nonattainment
new source review program 18 months following such finding or
disapproval unless the State corrects the deficiency before that date.
EPA proposes that the highway funding restrictions sanction will also
apply 24 months following such finding or disapproval unless the State
corrects the deficiency before that date. EPA is also proposing that
the provisions in 52.31 regarding staying the sanctions clock and
deferring the imposition of sanctions would also apply.
    Mandatory sanctions under section 179 generally apply only in
nonattainment areas. By its definition, the emission offset sanction
applies only in areas required to have a part D NSR program, typically
areas designated nonattainment.\9\ Section 179(b)(1) expressly limits
the highway funding restriction to nonattainment areas. Additionally,
EPA interprets the section 179 sanctions to apply only in the area or
areas of the State that are subject to or required to have in place the
deficient SIP and for the pollutant or pollutants the specific SIP
element addresses. In this case, mandatory sanctions would apply in all
areas designated nonattainment for a NAAQS within the State because
Utah rule R307-107 applies statewide and applies for all NAAQS
pollutants.
---------------------------------------------------------------------------

    \9\ An exception to this, not relevant here, is areas located in
the Ozone Transport Region, which are required to have a part D NSR
program regardless of the area's designation. See CAA section
184(b)(2).
---------------------------------------------------------------------------

    EPA has additional authority to impose discretionary sanctions
under CAA section 110(m). EPA's authority to impose sanctions under
section 110(m) is triggered by the same findings that trigger the
mandatory imposition of sanctions. However, under section 110(m), EPA
may impose sanctions more quickly than provided under the mandatory
sanction provision and may also impose them in a broader area.
Specifically, under section 110(m), EPA may impose sanctions ``any
time'' after it has made a finding of deficiency or disapproved a SIP.
In addition, EPA may impose the sanctions with respect to ``any portion
of the State the Administrator determines reasonable and appropriate.''
Finally, although imposition of the 2-to-1 offset sanction is still
limited by its terms to areas with part D NSR programs, the highway
funding restrictions can be applied in areas designated as attainment
or unclassifiable as well as those designated nonattainment. See 59 FR
1476 (January 11, 1994); 40 CFR 52.30(d)(2). EPA may determine whether
or not to use this authority in response to a SIP failure, and, thus,
they are termed discretionary sanctions.
    Because only limited portions of the State are designated
nonattainment, the mandatory sanctions would not be applicable in all
areas of the State that are covered by the rule we have proposed is
deficient. EPA is requesting comment on whether to exercise its
discretionary authority to impose the highway funding restrictions
sanction in all areas of the State, regardless of

designation, if it finalizes this proposed SIP call and the State fails
to submit a complete SIP revision or EPA disapproves such revision. If
EPA were to impose discretionary sanctions, EPA proposes that the same
24-month clock would apply to the highway funding sanction as would
apply under the mandatory sanctions.
    In addition to sanctions, if EPA finalizes this SIP call and then
finds that the State failed to submit a complete SIP revision that
responds to the SIP call or disapproves such revision, the requirement
under section 110(c) would be triggered that EPA promulgate a FIP no
later than two years from the date of the finding or the disapproval if
the deficiency has not been corrected.

V. Proposed Action

    EPA is proposing that the Utah SIP is substantially inadequate to
attain or maintain the NAAQS or to otherwise comply with requirements
of the CAA due to significant deficiencies created by Utah's
unavoidable breakdown rule, R307-107. Pursuant to CAA sections
110(a)(2)(H) and 110(k)(5), EPA is proposing to require that Utah
revise the SIP to correct the inadequacies and submit the revised SIP
to EPA within 12 months of the effective date of a final rule finding
the SIP substantially inadequate. EPA is proposing that mandatory
sanctions under CAA section 179 would apply as provided in 40 CFR 50.31
should Utah not submit a complete SIP consistent with a final SIP call
requirement or should EPA disapprove any such submission. EPA is also
requesting comment on whether EPA should exercise its discretionary
authority under section 110(m) to impose highway funding restrictions
in all areas of the State if 24 months after a sanctions clock has been
triggered, the State has still not corrected the deficiency that
triggered the sanctions clock.
    We are soliciting comments on these proposed actions. Final
rulemaking will occur after consideration of any comments.

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 also not subject to Executive
Order 13211, ``Actions Concerning Regulations That Significantly Affect
Energy Supply, Distribution, or Use'' (66 FR 28355, May 22, 2001).
    This proposed action would only require the State of Utah to revise
UAC R307-107 to address requirements of the CAA. Accordingly, the
Administrator certifies that this proposed action would 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 proposed action would not impose any requirements on small
entities.
    Since the only costs of this action would be those associated with
preparation and submission of the SIP revision, EPA has determined that
this proposed action would not include a Federal mandate that may
result in expenditures of $100 million or more to either state, local,
or tribal governments in the aggregate, or to the private sector in any
one year. Accordingly, this proposed action is not subject to the
requirements of sections 202 or 205 of the unfunded mandates reform act
(UMRA).
    In addition, since the only regulatory requirements of this
proposed action would apply solely to the State of Utah, this action is
not subject to the requirements of section 203 of UMRA because it
contains no regulatory requirements that might significantly or
uniquely affect small governments.
    Since this proposed action would impose requirements only on the
State of Utah, it also does not have tribal implications. It would 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 would 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 would simply maintain the relationship and
the distribution of power and responsibilities between EPA and the
states as established by the CAA. This proposed SIP call is required by
the CAA because EPA believes the current SIP is substantially
inadequate to attain or maintain the NAAQS or comply with other CAA
requirements. Utah's direct compliance costs would not be substantial
because the proposed SIP call would require Utah to submit only those
revisions necessary to address the SIP deficiencies and applicable CAA
requirements.
    EPA interprets Executive Order 13045 ``Protection of Children from
Environmental Health Risks and Safety Risks'' (62 FR 19885, April 23,
1997) as applying only to those regulatory actions that concern health
or safety risks, such that the analysis required under section 5-501 of
the Executive Order has the potential to influence the regulation. This
action is not subject to Executive Order 13045 because it would not
establish an environmental standard, but instead would require Utah to
revise a state rule to address requirements of the CAA.
    Section 12 of the National Technology Transfer and Advancement Act
of 1995 requires Federal agencies to evaluate existing technical
standards when developing a new regulation. To comply with the National
Technology Transfer and Advancement Act, EPA must consider and use
``voluntary consensus standards'' (VCS) if available and applicable
when developing programs and policies unless doing so would be
inconsistent with applicable law or otherwise impractical. In making a
finding of a SIP deficiency, EPA's role is to review existing
information against previously established standards. In this context,
there is no opportunity to use VCS. Thus, 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.
    This proposed action would not impose an information collection
burden under the provisions of the Paperwork Reduction Act of 1995 (44
U.S.C. 3501 et seq.), since it would only require the State of Utah to
revise UAC R307-107 to address requirements of the CAA.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Carbon monoxide,
Intergovernmental relations, Lead, Nitrogen dioxide, Ozone, Particulate
matter, Reporting and recordkeeping requirements, Sulfur oxides,
Volatile organic compounds.

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

    Dated: November 10, 2010.
James B. Martin,
Regional Administrator, Region 8.
[FR Doc. 2010-29237 Filed 11-18-10; 8:45 am]
BILLING CODE 6560-50-P


[Federal Register Volume 82, Number 47 (Monday, March 13, 2017)]
[Notices]
[Pages 13531-13533]
[FR Doc No: 2017-04810]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IA-4659; File No. 803-00231]

The Jeffrey Company; Notice of Application

March 7, 2017.
AGENCY: Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of application for an exemptive order under the
Investment Advisers Act of 1940 (``Advisers Act'').

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

Applicant: The Jeffrey Company (the ``Applicant'').

Relevant Advisers Act Sections: Exemption requested under Section
202(a)(11)(H) of the Advisers Act from Section 202(a)(11) of the
Advisers Act.

Summary of Application: The Applicant requests that the Commission
issue an order declaring the Applicant to be a person not within the
intent of Section 202(a)(11) of the Advisers Act, which defines the
term ``investment adviser.''

Filing Dates: The application was filed on September 2, 2016, and
amended on December 14, 2016 and February 9, 2017.

Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving the Applicant with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on April 3, 2017, and should be accompanied by proof of service on
the Applicant, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to Rule 0-5 under the Advisers Act,
hearing requests should state the nature of the writer's interest, any
facts bearing upon the desirability of a hearing on the matter, the
reason for the request, and the issues contested. Persons may request
notification of a hearing by writing to the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street
NE., Washington, DC 20549. Applicant, The Jeffrey Company, c/o Dan L.
Jaffe, Vorys, Sater, Seymour and Pease LLP, 52 East Gay Street,
Columbus, Ohio 43215.

FOR FURTHER INFORMATION CONTACT: James McGinnis, Senior Counsel, at
(202) 551-3025 or Holly Hunter-Ceci, Acting Assistant Chief Counsel, at
(202) 551-6825 (Division of Investment Management, Chief Counsel's
Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site either at http://www.sec.gov/rules/iareleases.shtml or by searching for the file number, or for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm, or by calling<PHONE_NUMBER>.

Applicant's Representations

    1. The Applicant, an Ohio corporation, is the managing member of
Jeffrey LLC, a Delaware limited liability company. By acting as
managing member of Jeffrey LLC, the Applicant provides services to the
family and descendants of Joseph A. Jeffrey (1836-1928) (``J.A.
Jeffrey''); all of the membership interests in Jeffrey LLC (``units'')
are owned directly or indirectly by the descendants of J.A. Jeffrey.
The securities of the Applicant also are 100% owned directly or
indirectly by the descendants of J.A. Jeffrey. The Applicant is managed
by a board of directors (the ``Board''), a majority of the members of
which are Family Members as defined in paragraph (d)(6) of Rule
202(a)(11)(G)-1 (the ``Family Office Rule'') (with J.A. Jeffrey being
the ``common ancestor'' for this purpose). Unless otherwise defined
herein, capitalized terms have the same meaning as defined in the
Family Office Rule.
    2. The Applicant provides services (both advisory and non-advisory)
to Jeffrey LLC in its capacity as the managing member of Jeffrey LLC.
    3. The Applicant has engaged Katahdin Asset Management LLC, a
Delaware limited liability company (``KAM''), to provide advisory and
non-advisory services to, and to conduct the day-to-day operations of,
Jeffrey LLC and the Applicant, with KAM's own employees (neither
Jeffrey LLC nor the Applicant having employees of its own), subject to
the direction of the Board. The Board also has the responsibility to
establish and periodically review and change as necessary the policies,
directives, and goals of Jeffrey LLC, as well as the right to monitor
and evaluate the performance of KAM in implementing the policies and
directives and in obtaining the goals of Jeffrey LLC.
    4. The Applicant represents that (i) each person served by the
Applicant is a Family Client, i.e., the Applicant has no clients other
than a Family Client as required by paragraph (b)(1) of the Family
Office Rule, (ii) the Applicant is owned and controlled in a manner
that complies in all respects with paragraph (b)(2) of the Family
Office Rule, and (iii) the Applicant does not hold itself out to the
public as an investment adviser as required by paragraph (b)(3) of the
Family Office Rule.
    5. The Applicant represents that Jeffrey LLC currently relies on an
exception from the definition of investment company pursuant to Section
3(c)(1) of the Investment Company Act of 1940, as amended (the
``ICA''). Jeffrey LLC would like to offer to additional Family Clients
the opportunity to invest in Jeffrey LLC (subject to securities law
compliance, including complying with applicable federal and state
exemptions from the registration of its securities). The Applicant
states that the 100 beneficial owner limitation of Section 3(c)(1) of
the ICA would cause family friction by denying to many Family Clients
the opportunity to invest in Jeffrey LLC. The Applicant states that
there are approximately 350 Family Members.

Accordingly, on March 11, 2016, Jeffrey LLC filed an application with
the Commission pursuant to Section 6(c) of the ICA requesting an
exemption from all of the provisions of the ICA and all rules and
regulations thereunder. Such exemption would permit Jeffrey LLC to
allow all Family Clients the opportunity to invest in Jeffrey LLC
without imposing on Jeffrey LLC the costs of registering under, and
complying with, the ICA.
    6. The Applicant represents that, in the event Jeffrey LLC were to
exceed the 100 beneficial owner limitation of Section 3(c)(1) of the
ICA, the Applicant would continue to meet the three general conditions
of the Family Office Rule set forth in item 4 above, with the exception
that Jeffrey LLC would not qualify as a Family Client, as more fully
described below. The Applicant represents that the assets owned
beneficially by Family Members and/or Family Entities (including assets
beneficially owned by Family Members and/or Family Entities indirectly
through Jeffrey LLC) will account for at least 75% of the assets for
which the Applicant provides services.
    7. The Applicant represents that units have not been, and will not
be, offered or sold to the public. The Applicant states that under
Jeffrey LLC's limited liability company agreement, sales or other
transfers of units for value to any purchaser, other than to Jeffrey
LLC itself, are prohibited. The Applicant further states that transfers
for value to existing members or other Family Clients are
prohibited.\1\ The Applicant represents that a market never will
develop for units. Applicant represents that the exit strategies
available to a Family Client will be to surrender units for redemption
by Jeffrey LLC at fair market value or to gift or contribute units to
other Family Clients. Investors are permitted to redeem their units at
the end of each calendar quarter.
---------------------------------------------------------------------------

    \1\ Applicant states that Jeffrey LLC allows a very limited
exception for estate planning transfers for value, such as
installment sales to a grantor trust. Any such transfers will be
made only to Family Clients. Additionally, investors are permitted
to pledge units as collateral for a loan, but only if the pledge
documents require, in lieu of foreclosure or other enforcement
action in the event of a default, that the pledged units be redeemed
by Jeffrey LLC prior to any transfer of economic or voting rights.
In the event that units are pledged, the party to which such units
are pledged shall not receive direct economic benefit from the units
nor can such party directly or indirectly vote the units.
---------------------------------------------------------------------------

Applicant's Legal Analysis

    1. Section 202(a)(11) of the Advisers Act defines the term
``investment adviser'' to mean ``any person who, for compensation,
engages in the business of advising others, either directly or through
publications or writings, as to the value of securities or as to the
advisability of investing in, purchasing, or selling securities, or
who, for compensation and as a part of a regular business, issues or
promulgates analyses or reports concerning securities . . . .''
    2. The Applicant currently complies with the Family Office Rule,
and thus the Applicant is not considered to be an ``investment
adviser'' under Section 202(a)(11) of the Advisers Act. In the event
that Jeffrey LLC were to exceed the 100 beneficial owner limitation of
Section 3(c)(1) of the ICA and thereby no longer would be excepted from
the definition of ``investment company'' under the ICA, the Applicant
would not comply with the Family Office Rule exclusion from the term
``investment adviser'' because the Applicant's ``client'' (Jeffrey LLC)
would not qualify as a Family Client under paragraph (d)(4)(xi) of the
Family Office Rule. The Applicant does not qualify for any of the
exemptions from registration as an investment adviser set forth in
Section 203(b) of the Advisers Act and, because the Applicant has
regulatory assets under management of more than $100 million, the
Applicant is not prohibited from registering with the Commission under
Section 203A(a) of the Advisers Act. Therefore, absent relief, the
Applicant may be required to register as an investment adviser under
Section 203(a) of the Advisers Act.
    3. The Applicant submits that, in the event Jeffrey LLC were to
exceed the 100 beneficial owner limitation of Section 3(c)(1) of the
ICA, the Applicant's relationship with Jeffrey LLC would not change the
nature of the Applicant into that of a commercial advisory firm. In
support of this argument, the Applicant notes that the Applicant would
continue to be held entirely by Family Clients, and the Applicant would
continue not to hold itself out to the public as an investment adviser.
The Applicant represents that Jeffrey LLC would continue to be managed
and controlled by the Applicant, which in turn is managed by the Board,
a majority of the members of which are Family Members.
    4. The Applicant states that, in requesting the order, the
Applicant is not attempting to expand its operations or engage in any
level of commercial activity to which the Advisers Act is designed to
apply. Further, in the event Jeffrey LLC receives from the Commission
an order exempting Jeffrey LLC from all of the provisions of the ICA
and all rules and regulations thereunder, given the conditions of such
exemptive order, which are designed to alleviate the policy concerns
implicated by expanding Jeffrey LLC beyond one hundred investors, the
Applicant submits that there is no practical difference from a
regulatory standpoint between (i) a pooled investment vehicle created
exclusively for the benefit of and wholly owned by Family Clients that
is ``excepted from the definition'' of ``investment company'' under the
ICA, and (ii) such a pooled investment vehicle that is, by virtue of a
Commission order, exempt from all the provisions of the ICA and all
rules and regulations thereunder.
    5. The Applicant also submits that there is no public interest in
requiring the Applicant to be registered under the Advisers Act. The
Applicant's services as managing member of Jeffrey LLC are specifically
and exclusively tailored to the needs of Jeffrey LLC. In the event
Jeffrey LLC were to exceed 100 beneficial owners, the Applicant's only
``client'' would continue to be Jeffrey LLC (and possibly other Family
Clients).
    6. The Applicant argues that, although the Family Office Rule
largely codified the exemptive orders that the Commission had
previously issued before the enactment of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, the Commission recognized in
proposing the Family Office Rule that the exact representations,
conditions, or terms contained in every exemptive order could not be
captured in a rule of general applicability. The Commission noted that
family offices would remain free to seek a Commission exemptive order
to advise an individual or entity that did not meet the proposed
``family client'' definition, and that certain situations may raise
unique conflicts and issues that are more appropriately addressed
through an exemptive order process where the Commission can consider
the specific facts and circumstances, than through a rule of general
applicability.
    7. The Applicant notes that the Commission has issued orders
subsequent to the adoption of the Family Office Rule, and that each of
those orders treated the applicant as a Family Office even though the
applicant was providing services to persons who did not fall within the
definition of ``Family Client.'' The Applicant submits that those
orders recognized unusual circumstances in which an entity provided
services to such persons while remaining focused on a single family's
needs. The Applicant maintains that its unusual circumstances--
providing services, in its capacity as a managing member, to an entity
that currently qualifies as a Family Client because it is excepted from
the definition of

``investment company'' under the ICA but would not be so excepted if it
were to exceed 100 beneficial owners--would not change the nature of
the Applicant's operations into that of a commercial advisory business,
and that an exemptive order is appropriate based on the Applicant's
facts and circumstances.
    8. For the foregoing reasons, the Applicant requests an order
declaring it to be a person not within the intent of Section 202(a)(11)
of the Advisers Act. The Applicant submits that the order is necessary
and appropriate, in the public interest, consistent with the protection
of investors, and consistent with the purposes fairly intended by the
policy and provisions of the Advisers Act.

Applicant's Conditions

    1. The Applicant will offer and provide services only to: (i)
Jeffrey LLC, which will generally be deemed to be, and treated as if it
were, a Family Client, and (ii) other Family Clients.
    2. The Applicant at all times will be wholly owned by Family
Clients and exclusively controlled (directly or indirectly) by one or
more Family Members and/or Family Entities as defined in paragraph
(d)(5) of the Family Office Rule.
    3. Jeffrey LLC at all times will be wholly owned by Family Clients.
    4. At all times the assets beneficially owned by Family Members
and/or Family Entities (including assets beneficially owned by Family
Members and/or Family Entities indirectly through Jeffrey LLC) will
account for at least 75% of the assets for which the Applicant provides
services.
    5. The Applicant will comply with all the terms for exclusion from
the definition of ``investment adviser'' under the Advisers Act set
forth in the Family Office Rule except for the limited exception
requested by the application.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-04810 Filed 3-10-17; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 76, Number 43 (Friday, March 4, 2011)]
[Notices]
[Pages 12101-12102]
[FR Doc No: 2011-4967]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[ Project No. 12737-002]

Jordan Hydroelectric Limited Partnership; Notice of Environmental
Assessment

    In accordance with the National Environmental Policy Act of 1969
and the Federal Energy Regulatory Commission's regulations, 18 CFR part
380 (Order No. 486, 52 FR 447897), the Office of Energy Projects has
reviewed the application for an original license for the 3.7-megawatt
(MW) Gathright Hydroelectric Project located on the Jackson River in
Alleghany County, Virginia, and has prepared an Environmental
Assessment (EA). In the EA, Commission staff analyze the potential
environmental effects of licensing the project and conclude that
issuing a license for the project, with appropriate environmental
measures, would not constitute a major Federal

action significantly affecting the quality of the human environment.
    A copy of the EA is on file with the Commission and is available
for public inspection. The EA may also be viewed on the Commission's
Web site at http://www.ferc.gov using the ``eLibrary'' link. Enter the
docket number excluding the last three digits in the docket number
field to access documents. For assistance, contact FERC Online Support
at<EMAIL_ADDRESS>or toll-free at<PHONE_NUMBER>, or for
TTY,<PHONE_NUMBER>.
    You may also register online at http://www.ferc.gov/docs-filing/esubscription.asp to be notified via e-mail of new filings and
issuances related to this or other pending projects. For assistance,
contact FERC Online Support.
    Comments on the EA should be filed within 30 days from the issuance
date of this notice, and should be addressed to the Secretary, Federal
Energy Regulatory Commission, 888 First Street, NE., Room 1-A,
Washington, DC 20426. Please affix ``Gathright Hydroelectric Project
No. 12737-002'' to all comments. Comments may be filed electronically
via Internet in lieu of paper. The Commission strongly encourages
electronic filings. See 18 CFR 385.2001(a)(1)(iii) and the instructions
on the Commission's Web site under the ``eFiling'' link. For further
information contact Allyson Conner at<PHONE_NUMBER>.

    Dated: February 25, 2011.
Kimberly D. Bose,
Secretary.
[FR Doc. 2011-4967 Filed 3-3-11; 8:45 am]
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[Federal Register Volume 80, Number 102 (Thursday, May 28, 2015)]
[Notices]
[Pages 30467-30468]
[FR Doc No: 2015-12848]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2011-N-0918]

Pediatric Studies of Meropenem Conducted in Accordance With the
Public Health Service Act; Availability of Summary Report and Requested
Labeling Changes

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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SUMMARY: The Food and Drug Administration (FDA) is publishing a summary
report of the pediatric studies of meropenem conducted in accordance
with the Public Health Service Act (the PHS Act) and is making
available requested labeling changes for meropenem. The Agency is
making this information available consistent with the PHS Act.

FOR FURTHER INFORMATION CONTACT: Lori Gorski, Center for Drug
Evaluation and Research, Food and Drug Administration, 10903 New
Hampshire Ave., Bldg. 22, Rm. 6415, Silver Spring, MD 20993-0002, 301-
796-2200, FAX:<PHONE_NUMBER>, email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Meropenem Summary Review

    In the Federal Register of August 13, 2003 (68 FR 48402), meropenem
was identified as a drug that needed further study in pediatrics. The
approved labeling lacked adequate information on dosing,
pharmacokinetic, tolerability, and safety data in newborns and young
infants with complicated intra-abdominal infections.
    A written request for pediatric studies of meropenem was issued on
September 10, 2004, to AstraZeneca Pharmaceuticals, the holder of the
new drug application (NDA) for meropenem. FDA did not receive a
response to the written request. Accordingly, the National Institutes
of Health (NIH) issued a request for proposals to conduct the pediatric
studies described in the written request on August 15, 2005, and
awarded funds to Duke University and Stanford University on September
28, 2007, to complete the studies described in the written request.
    On completion of the studies, the Eunice Kennedy Shriver National
Institute of Child Health and Human Development (NICHD) submitted a
final clinical study report for meropenem to FDA for review under
investigational new drug application (IND) 101043: (NICHD-2005-18) ``A
Multiple Dose PK Study of Meropenem In Young Infants (less than 91 days
of age) With Suspected or Complicated Intra-abdominal Infections.''
    In the Federal Register of February 27, 2012 (77 FR 11556), FDA
announced the opening on February 17, 2012, of docket FDA-2011-N-0918
for submission of data from pediatric studies of meropenem. The data
submitted to the docket by NIH were submitted in accordance with
section 409I of the PHS Act (42 U.S.C. 284m) and were the same data
submitted to IND 101043, with the exception that personal privacy
information had been redacted from the data submitted to the docket.

    The meropenem docket remained opened for public comment from
February 27, 2012, until March 28, 2012. There were no comments
submitted to the docket during that time. The key findings of this
final clinical study report are:
    The submitted study was an open-label, non-comparative,
multicenter, prospective, multiple pharmacokinetic (PK) and safety
study in infants less than 91 days of age. The study enrolled 200
infants with a median postnatal age of 21 days (range 1 to 92 days) and
a median gestation age (GA) of 27.8 weeks (range 22.5 to 40 weeks).
Infants with complicated intra-abdominal infections who were receiving
meropenem based on local standard of care were eligible for enrollment.
Complicated intra-abdominal infections were defined per the protocol as
physical, radiologic, or bacteriologic findings of complicated intra-
abdominal infection to include peritonitis, necrotizing enterocolitis
(NEC) grade II or higher by Bell's criteria, Hirschsprung's disease
with perforation, spontaneous perforation, meconium ileus with
perforation, bowel obstruction with perforation, as evidenced by free
peritoneal air on abdominal radiograph, intestinal pneumatosis, or
portal venous gas on abdominal radiographic examination, or possible
NEC.
    The study was not statistically powered to establish efficacy
because the Division of Anti-Infective Products agreed that
extrapolation of efficacy to pediatric populations from adult
populations was acceptable. However, clinical efficacy endpoints were
also evaluated. The efficacy assessment included a comparison of the
clinical status at study baseline and at day 28 or after a minimum of 7
days of treatment, using a combination of an assessment using the Score
for Neonatal Acute Physiology II tool and other protocol specified
outcome criteria. The clinical endpoint was defined as the patient
being alive, with negative bacterial cultures from a sterile body
fluid, and a presumptive clinical cure. Clinical failure was defined as
death, change in antibiotic therapy while on study drug, or lack of
presumptive clinical cure. The addition of treatment directed against
Gram-positive pathogens from a non-abdominal source was not considered
to represent treatment failure. Using these criteria, 195/200 patients
or 97.5 percent were considered to have achieved the clinical endpoint.
Of the 195 patients included in the efficacy population, 192 (98.5
percent) were evaluated for efficacy. The overall efficacy success rate
for the study was 84.4 percent (95 percent confidence interval, 78.5 to
89.2 percent).
    Analysis of safety was a primary objective of the study. The
following assessments were included in the study: Monitoring for
adverse events, serious adverse events, and death; documentation of
seizures; acute abdominal complications; development of resistant
bacterial infection or candidiasis; treatment failure; physical
examination; clinical laboratory values; cultures from sterile sites,
and concomitant medications. There were 11 deaths in the study; all
occurred in patients less than 32 weeks GA. The most common cause of
death was multi-organ failure. None of the deaths were related to
meropenem administration. The following adverse events occurred with a
frequency in the study that differed from that seen in previous
pediatric and adult studies: Convulsion (seizures), 5 percent,
hyperbilirubinemia, 4.5 percent and vomiting, 2.5 percent. Study
oversight included a safety committee and an independent data safety
monitoring board.
    The Division of Anti-Infective Products agreed that meropenem was
well-tolerated in the pediatric population enrolled in the study. Of
the 10 patients with seizures, 8 patients were adjudicated to have
developed seizures possibly due to the study medication. Because
cerebrospinal fluid was only evaluated in a limited number of patients
with seizures, it is not possible to determine if the seizure threshold
may have changed due to possible underlying meningitis and the
administration of meropenem.

II. Recommendation

    This study supports the use of meropenem in neonates and infants
less than 91 days of age for complicated intra-abdominal infections.
However, infants with complicated intra-abdominal infections are
anticipated to have different physiological characteristics than
patients with meningitis that may impact the PK of meropenem; as such,
it may not be appropriate to apply the PK findings from this population
to a patient population with meningitis. The Division recommended that
the evaluation of meropenem in infants less than 91 days of age be
limited to the treatment of complicated intra-abdominal infections at
this time.
    FDA's requested labeling changes, including dosing recommendations
for the use of meropenem in neonates and infants less than 91 days of
age for complicated intra-abdominal infections, are available on the
FDA Web site at http://www.fda.gov/Drugs/DevelopmentApprovalProcess/DevelopmentResources/ucm379088.htm and in the docket (Ref. 1).

    Dated: May 21, 2015.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2015-12848 Filed 5-27-15; 8:45 am]
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