  SEQ CHAPTER \h \r 1 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON D.C., 20460

OFFICE OF

PREVENTION, PESTICIDES AND TOXIC SUBSTANCES

MEMORANDUM

SUBJECT:	Assessment of the Benefits of Soil Fumigation with Metam-Sodium
in Carrot Production (DP# 337490)

FROM:	David Donaldson

Economic Analysis Branch

		Richard Michell

Biological Analysis Branch

Biological and Economic Analysis Division (7503P)

THRU:	Arnet Jones, Chief

Biological Analysis Branch

Timothy Kiely, Chief

Economic Analysis Branch

Biological and Economic Analysis Division (7503P)

TO:		John Leahy, Senior Policy Analyst

		Special Review and Reregistration Division (7508P)

PRODUCT REVIEW PANEL REVIEW: February 15, 2007

SUMMARY

This assessment estimates the value of metam-sodium use in carrot
production in California and Washington.  There are approximately
102,000 acres of carrots grown in the U.S. annually.  Metam-sodium, the
primary fumigant used in carrot production, is applied to about 30% or
30 thousand of these acres.  Metam-sodium is used to control a mix of
nematodes, plant pathogens, and weeds, resulting in higher yields and
reduced production costs compared to alternative control measures
including 1,3-dichloropropene and additional herbicide and fungicide
applications.

BEAD estimates the benefit of metam-sodium in California carrot
production to be about $3.5 million annually resulting from reduced
production costs compared to fumigation with 1,3-dichloropropene and
applications of other herbicides and fungicides.  However,
1,3-dichloropropene is subject to regulatory restrictions in California
that may limit it’s availability for use by carrot growers.  If
1,3-dichloropropene were not available to California growers, the
benefits of metam sodium could be as much as $140 million because
production on the 23,000 acres currently using metam-sodium would not be
viable.  BEAD estimates that the benefits of metam-sodium use in
Washington carrot production is at least $250 thousand, resulting from
the higher production costs of using the metam-sodium alternative
dichloropropene and additional herbicide applications.  However,
benefits could be as high as $3.5 million if metam-sodium makes carrot
production viable these acres.  These benefits are shared by carrot
producers in terms of higher returns, and consumers in terms of greater
supply and lower carrot prices.

STATEMENT OF PURPOSE

As part of the Reregistration Eligibility Decision (RED) process, EPA is
assessing the risks and benefits of the use of several soil fumigants as
a group:  chloropicrin, metam-potassium, metam-sodium, and methyl
bromide.  This document presents the assessment of the benefits to
carrot production that is provided by metam-sodium, the predominantly
used subject fumigant.

Conceptually, the benefits of a pesticide like a soil fumigant are
comprised of the improvements in production and/or reductions in cost
resulting from the pesticide use.  The social benefits of a pesticide
are divided between the users of the pesticide, e.g., carrot producers,
and consumers of carrots and carrot-containing products.  Consumers
benefit because higher production and/or lower costs translate into a
cheaper and more abundant supply of carrot. The impact of fumigant
regulation on this consumer benefit is not explicitly evaluated in this
document.

In evaluating the benefits of soil fumigants, this document compares the
current situation in which fumigants are available for use, subject to
existing label restrictions, to the situation that is estimated to occur
were the fumigants not available.  This is somewhat different from other
BEAD assessments of the impacts of regulation, in that no specific
regulatory scheme is considered.

BACKGROUND

This assessment focuses on carrot production in California and
Washington.  California is included in this assessment because, in terms
of total carrot production, for both the fresh and processing markets,
and fumigant use in carrots, it is the most important state.  Washington
is included in this assessment because it is the leading producer of
carrots for processing, in terms of acres harvested, and metam-sodium is
widely used in the Washington production system.  Though there are other
important states that produce carrots for processing, fumigants are
either not used, or not covered by pesticide use reporting systems
available to EPA.  This indicates that fumigant pest related issues are
less prominent in other growing regions.  Nonetheless, we anticipate
that our findings will be generally relevant to all U.S. carrot
production where metam-sodium is used.  This assessment is focused
exclusively on measuring the benefits of metam sodium.  We are not
assessing the benefits of chloropicrin in carrot production, which is
also being considered by the Agency under a Reregistration Eligibility
Decision.  This is because chloropicrin is used on only 3% of carrot
acreage, is used in combination with dichloropropene, and because we
have little information describing the carrot yield and quality benefits
of chloropicrin use in this scenario.

Carrots are a cool-season crop typically produced in deep, loose, and
well drained soils.  The crop is typically irrigated with sprinkler or
furrow irrigation systems.  The varieties planted depend upon the
specific intended fresh or processing markets.  The crop is grown in
three to five year rotations with grains, potatoes, peppers, garlic,
melons, onions, tomatoes, or cotton.  Many of these crops also depend on
the soil fumigation treatments applied prior to planting carrots.  High
value crops like carrots also allow growers to rotate with lower value
crops.  The major carrot pests, nematodes and diseases, typically cause
quality and yield losses.

Carrots are grown for either the fresh or processed markets. California
is the leading carrot producing state with approximately 80% of the
fresh market and about one third of the processed market.  The San
Joaquin Valley accounts for more than half the state’s carrot
acreage—though, to accommodate year round production, carrots are
grown in three other regions, low desert, high desert, and costal inland
valleys.  Other important carrot producing states include Michigan and
Texas, where carrots for both the fresh and processed markets are grown.
 Washington and Wisconsin produce significant quantities of carrot for
the processing market. On a national basis, there are an average of 85
and 16 thousand acres of carrots harvested for the fresh and processing
markets, respectively. Tables 1 and 2 provide detailed fresh and
processing market carrot production data for selected states and the
U.S.

Table 1.  Carrots Grown For The Fresh Market, Yield, Price, Acreage,
Production, And Value, By Selected Region, 2001-2005 Average1.

Region	Yield (CWT)	Price per CWT ($)	Value per Acre ($)	Harvested Acres
Production (1,000 CWT)	Value of Production

($1,000)

California	298	20	6,079	67,900	20,228	412,814

Michigan	318	13	4,204	4,280	1,364	18,037

Texas	285	25	7,051	2,420	689	17,281

United States	313	19	6,032	85,572	26,801	516,017

Sources:  Crop Summary (USDA NASS, 2002-2006); Agricultural Prices (USDA
NASS, 2002-2006).

1. Table values have been rounded.

Table 2.  Carrots Grown For The Processing Market, Yield, Price,
Acreage, Production, And Value, By Selected Region, 2001-2005 Average1.

Region	Yield (tons)	Price per Ton ($)	Value per Acre ($)	Harvested Acres
Production (tons)	Value of Production

($1,000)

California	31	98	3,093	3,460	110,222	10,721

Michigan	23	66	1,518	1,520	34,920	2,311

Texas	17	62	1,044	1,400	24,148	1,423

Washington	30	69	2,096	4,760	144,512	9,975

Wisconsin	23	63	1,449	3,980	90,210	5,693

United States	27	74	1,987	16,232	431,598	32,169

Sources:  Crop Summary (USDA NASS, 2002-2006); Agricultural Prices (USDA
NASS, 2002-2006).

1. Table values have been rounded.

Fumigant Use

The following section summarizes our understanding of the use of
fumigants in carrot production.  In preparing this summary, we referred
to all available pesticide use data for the period 2001 to 2005.  These
included data from the U.S. Department of Agriculture, National
Agricultural Statistics Service (NASS), The California Department of
Pesticide Regulation, Pesticide Use Reports (PUR), Phase 3 public
comments submitted to the Agency, communication with carrot producers,
and proprietary pesticide use, and usage data.  It is worth noting that
these sources are frequently divergent.  For this reason, we have
reviewed each of the sources carefully and have used what we concluded
to be the most appropriate and accurate information.  Thus, the data
provided below reflects an element of professional judgment.  It may
therefore be difficult to independently calculate the same estimates of
fumigant use.  Nonetheless, the following data provides insight into the
extent and general importance of fumigants in carrot production.

As shown in Table 3, Carrots are commonly fumigated with dichloropropene
and metam-sodium, and to a small extent with chloropicrin.  Over 6
million pounds of fumigants are used on carrots per year in the U.S.
Dichloropropene is used on approximately 20% of carrot acres and
Metam-sodium is used on about 30%.  About 3% of carrot acreage are
treated with chloropicrin, which is applied in combination with
1,3-dichloropropene.  In total, about one half of the U.S. carrot crop
is treated with one or more fumigant.

Table 3.  Annual fumigant Usage on Carrots, 2001-2005.

Region	% Acres Treated1	Acres Treated	Pounds Applied

California

Chloropicrin	4	2,800	70,000

Dichloropropene	12	8,400	844,000

Metam-sodium	33	23,200	3,947,000

Washington

Dichloropropene	46	2,200	376,000

Metam-sodium	37	1,800	234,000

United States2

Chloropicrin	3	-	70,000

Dichloropropene	20	-	1,200,000

Metam-sodium	30	-	4,900,000

Source:  NASS Pesticide Use Reports, California PUR, and EPA proprietary
data.

Note, Percent crop treated data and pounds applied were taken from the
above data sources.  Total area treated and pounds applied are
calculated in the table.

1. Percent crop treated estimates apply to 70,360 acres of carrots
harvested in California, 4,760 acres of carrots harvested in Washington,
and 101,800 acres of carrots harvested in the U.S.

2. A dash indicates that data are not available.

FUMIGATION CHARACTERISTICS

Target Pests

Fumigants are used alone or in combination in California and Washington
to control the following nematodes, weeds, and diseases in carrot
production.

Table 4. Key Carrot Pests, weeds, and diseases.

Region 	Key diseases, Pests and weeds

California	Nematodes (root-knot)

Nutsedge and Redroot Pigweed

Pythium [cavity spot] and Rhizoctonia [crown rot, violet root rot,
seedling root rot]

Washington	Nematodes (including root-knot & stubby-root

Volunteer Potatoes and Volunteer Wheat

          References:  Nunez, 2006; USDA, 2000a; USDA 2000b.

Use Characteristics

California

Metam-sodium is applied via sprinkler or flood, or as a soil injection
application prior to listing carrot beds.  The soil is irrigated prior
to application.  Approximately ten days later, metam-sodium is applied
(Grimmway Farms, 2005).  Chloropicrin is applied in combination with
1,3-dichloropropene (i.e., Telone C-17) as a soil injection treatment.
Chloropicrin is not used alone.

The metam-sodium use rate for control of nematodes, diseases, and weeds
ranges from 162 -  213 pounds per acre (Bolthouse Farms 2005; Grimmway
Farms, 2005).   The Average chloropicrin use rate is about 18 pounds per
acre and is only used in combination with 1,3-dichloropropene (Grimmway
Farms, 2005).  The 1,3-dichloropropene use rate in the Telone C-17
product is 88.5 pounds per acre (Bolthouse Farms 2005; Grimmway Farms,
2005).

Carrot acres treated per day with all fumigants ranges from 40 to 80
acres and varies by application method (Grimmway Farms, 2005; Bolthouse
Farms 2005).  According to the 2002 Census of Agriculture, there are 417
farms producing carrots in California at an average size of 164.6 acres.

A water seal is typically used for metam-sodium.  Soil is compressed
with a bar when metam-sodium is injected.  Listing of rows is done
immediately after injection treatments with chloropicrin plus
dichloropropene or dichloropropene alone (Bolthouse Farms 2005; Grimmway
Farms, 2005).  This information is summarized in Table 5 below.

Table 5.  Selected Fumigation Application Information For Carrots Grown
In California.

	Chloropicrin1	Dichloropropene	Metam-sodium

Application Rate (lb. ai/acre)	18	89 (in combination with chloropicrin);
121 (used alone) 	162-213 (Average 170)

Acres Treated per Day	80 (soil injection)	80 (soil injection)	40-60
(flood, sprinkler [excluding center pivot] drip), 80 (soil injection)

Time of Fumigation 	June-March, & September-November	Year-round (varies
with county)	Year-round (varies with county)

Application Method 	Soil injection via Telone product (i.e., Telone
C-17)	Soil injection	Soil injection, flood irrigation, drip irrigation,
or sprinkler irrigation

Strip Application (% of Usage & % of field area) 	All broadcast	All
broadcast	Small percentage applied as a strip treatment, mostly
broadcast

Soil Sealing Procedures 	Soil (immediate listing of beds after
treatment)	Soil (immediate listing of beds after treatment)	Water seal
or pipe drag behind injection bar for soil injection applications.

1 only used in combination with 1,3-Dichloropropene.

Washington

According to the 2002 Census of Agriculture, there are 141 carrot farms
in Washington and they average 74 acres each.  Metam-sodium is applied
via center pivot irrigation systems in Washington. The circular treated
fields reportedly average around 125 acres and can be treated in a range
of 6 – 35 hours (Crosby, 2007).  The typical metam-sodium use rate in
Washington is 140 pounds per acre. This information is summarized in
Table 6 below.

Table 6.  Fumigation Application Information For Carrots Grown In
Washington.

	Metam-sodium

Application Rate (lb. ai/acre)	140

Acres Treated per Day	125 acre center pivot fields can be treated in
from 6 – 35 hours (Crosby, 2007)

Time of Fumigation 	Fall

Application Method 	Via sprinkler irrigation

Strip Application 	All broadcast

Soil Sealing Procedures	Water seal

PEST CONTROL PRACTICES

The following section provides the cultural and chemical control
practices currently in use in California and Washington carrot
production.  The available alternative control measures are also given
below.

Cultural Control Practices

Growers in both California and Washington utilize production practices
that identify types and levels of pests in individual fields, reduce
pest populations, determine which fields require treatment, and
determine the treatment of choice for individual fields.  These
practices include soil sampling for target pests, deep plowing previous
crop residues, crop rotations, field selection, hand weeding, selective
irrigation timing, selective planting dates, and cover crops (Washington
State University, 2002; CMCC and CFCAB, 2005).

Chemical Control Practices

California

Metam-sodium:  Metam-sodium is applied for control of a wide range of
pests in California.  It is used for low level root-knot nematode
infestations.  It is used for pythium [cavity spot] and rhizoctonia
diseases [crown rot, violet root rot, seedling root rot].  Metam-sodium
is also used to control nutsedge and redroot pigweed.  One gallon of 42%
active ingredient product contains 4.26 pounds of active ingredient.

Chloropicrin + 1,3-dichloropropene (Telone C-17):
Chloropicrin-dichloropropene combination products are used to control
nematodes and some disease and weed pests.  These products are used on a
limited basis in California carrot production due to their high cost.
Chloropicrin, used in combination with dichloropropene, reportedly
provides control of certain soil borne pathogens.  Control of moderate
to high level root-knot nematode infestations, wireworms and symphylans
is provided by the dichloropropene ingredient (Bolthouse Farms, 2005 and
Grimmway Farms, 2005).   One gallon of Telone C-17 contains 8.2 pounds
of 1,3-dichloropropene plus 1.7 pounds of chloropicrin.

1,3-dichloropropene: When moderate to high nematode populations exist
prior to planting, growers will typically use a 1,3-dichloropropene
alone product (e.g., Telone II), regardless of disease or weed pests,
because nematodes are the most damaging carrot pests.  Accordingly, the
majority of 1,3-dichloropropene usage is in these instances.  It may be
more advantageous to use a chloropicrin-dichloropropene combination
product (e.g., Telone C-17) but the high cost of these products keeps
usage to a minimum.

Washington

Metam-sodium: Metam-sodium is used in Washington carrot production
mainly for control of low level root-knot nematode infestations.  It is
also used to a lesser extent for the control of volunteer potatoes and
volunteer wheat.  One gallon of 42% active ingredient product contains
4.26 pounds of active ingredient.

Alternatives

Specific control alternatives for the various carrot-pest combinations
associated with use of the subject fumigants in California and
Washington are as follows:

California

Nematodes (root-knot): major usage of metam-sodium and dichloropropene
(Telone); minor usage of chloropicrin reported.  Use of other registered
pesticides was not reported in the usage data (EPA, 2007).  Growers are
already using a variety of non-chemical alternatives, including crop
rotation, field selection, and cover crops. These methods alone do not
ensure that carrots will not be adversely affected by nematodes (USDA,
2000a).  Metam-sodium is reportedly used to control low nematode
populations; whereas dichloropropene is suitable for controlling
moderate and high populations.  Limitations to dichloropropene use
include buffer zones of 300 feet, township caps, restricted use within
the San Joaquin Air Basin during December and January, and special
permit requirements. Dichloropropene also must be applied by injection
by certified applicators.

Nutsedge: low usage of metam-sodium to control this pest.  The
registered alternative linuron appears to be the alternative of choice
for this pest.  Only low usage levels of the alternatives fluzifop and
trifluralin were reported in the available usage data (EPA, 2007).

Redroot Pigweed: minor usage of metam-sodium to control this pest.  The
registered alternatives linuron and trifluralin appear to be the
alternatives of choice (EPA, 2007).  The other registered alternatives
are carfentrazone-ethyl, metribuzin, glyphosate, and pyraflufen-ethyl.
Linuron and trifluralin are rated as excellent and fair/good,
respectively, for control of broadleaf weeds (CMCC and CFCAB, 2005).

Pythium [cavity spot]: moderate usage of metam-sodium for control of
this pest; low usage of chloropicrin and 1,3-dichloropropene used for
control of this pest.  Mefenoxam appears to be the registered pesticide
of choice (EPA, 2007).  Among the other registered alternatives there is
moderate usage of azoxystrobin and low usage of iprodione.  The
California Crop Profile for Carrots (2000) states that “without
mefenoxam growers would incur 25% losses”.

By planting carrots in a three-year rotation with crops other than
alfalfa, and maintaining proper irrigation, the incidence of cavity spot
can be reduced. Carrots should be harvested at the first sign of
maturity since older carrots are more susceptible.  No Biological
Control methods have been established for cavity spot.

Mefenoxam is applied preplant incorporated or applied to the soil
surface and irrigated immediately after planting. Rates used are 0.03 to
0.06 pounds active ingredient per acre.  Only crops with mefenoxam
registration can be planted back in treated soil within the next 12
months. Cercospora leaf blight is also reported to be controlled with
mefenoxam.  Cavity spot is the most troublesome root disease in carrots.
 All the other fungicide alternatives are rated as poor control measures
(CMCC and CFCAB, 2005).

Rhizoctonia [crown rot, violet root rot, seedling root rot]: moderate
usage of metam-sodium to control this pest.  No usage of registered
alternatives detected in usage data (EPA, 2007).  Registered
alternatives are azoxystrobin (root rot, crown rot, seedling root rot),
fludioxonil (seedling root rot), Bacillus subtilis strain QST 713 (low
pest pressure only, for unspecified Rhizoctonia disease) and mono- and
di-potassium salts of phosphorous acid (unspecified Rhizoctonia
disease).  No information was located on the comparative efficacy of the
metam-sodium alternatives.

California Alternatives Pest Control Summary:  Dichloropropene is the
only suitable fumigant for moderate and high nematode populations.  It
also provides control of wireworms and symphylans.  There are no
non-fumigant alternatives for control of nematodes.  Nutsedge and
redroot pigweed are minor pests of metam-sodium in California carrot
production.  There appears to be several adequate metam-sodium
alternatives for these pests, but linuron is the most prominent.
Pythium and rhizoctonia are moderately important pests of California
carrots.  Mefenoxam is a suitable metam-sodium alternative for pythium
control.  Azoxystrobin and iprodione can also be used.  Cultural control
measures are also available to carrot producers.  Alternative
rhizoctonia controls include azoxystrobin and fludioxonil.  For lower
infestation levels, Bacillus subtilis strain QST 713 and mono- and
di-potassium salts of phosphorous acid provide adequate control.

Washington

Nematodes (including root-knot & stubby-root): major usage of
metam-sodium and dichloropropene for control of this pest (EPA, 2007).
According to the August 2000 Crop Profile for Carrots in Washington
State: cultural methods, crop rotation, cover crops, and field
selection, are reported as moderately effective controls; economic
thresholds are used by 43% of Washington state carrot growers to
determine when or whether to treat for nematodes; and more than
seventy-five percent of the acreage is treated with 1,3-dichloropropene
or metam-sodium.

Based on current use patterns, the non-fumigant oxamyl appears to be
unsuitable for controlling moderate and high nematode populations.
However, oxamyl is used in certain situations (dicer carrot crops,
fumigant buffer zones, where fumigants are not cost effective) and is
primarily applied via center pivot irrigation systems.  It is
occasionally applied using other chemigation systems, or as a soil
treatment (preplant or postplant).

Volunteer Potatoes low acreage treated with metam-sodium.  The
registered alternative linuron appears to be the control measure of
choice based on the usage data for this pest (EPA, 2007).  Hand weeding
is practiced, but is expensive and impractical when high levels of this
pest are present.

Volunteer wheat low acreage treated with metam-sodium.  Significant
usage of the alternatives clethodim, fluazifop, and glyphosate imply
that they are probably suitable metam-sodium alternatives (EPA, 2007).
No other information located on alternative control measures.

Washington Alternatives Pest Control Summary:  Dichloropropene is the
only suitable fumigant for moderate and high nematode populations.
Dichloropropene is used in Washington carrot production for moderate to
high level root-knot nematode infestations.  Dichloropropene also
controls wireworms (Washington State University, 2002).  Registered
alternative oxamyl has very low usage and is reportedly used in addition
to fumigants much of the time and in special situations.  Linuron is an
adequate control measure for volunteer potatoes, and clethodim,
fluazifop, and glyphosate appear to be adequate for controlling
volunteer wheat.

BENEFITS OF FUMIGATION

Yield and Quality

In both California and Washington, 1,3-dichloropropene plus an
additional herbicide application (and an additional fungicide in
California) appears to be a suitable alternative for all pests
controlled by metam-sodium.  Though we have limited data, we do not
anticipate yield losses when these alternatives are available and used.
However, in California, there are numerous restrictions that apply to
dichloropropene, the primary alternative for nematode control.  These
restrictions may limit the use of dichloropropene on that part of the
carrot crop that is currently treated with metam-sodium.  Where neither
metam-sodium nor dichloropropene are available, we assume that growers
will experience 25% yield losses.  An estimate of the portion of the
carrot crop that would fall in this range is not available.  This yield
loss estimate is based on information provided by the California Carrot
Board (California Carrot Board, 2006).  Based on correspondents with
Washington carrot production experts and limited reported usage, we also
assume that oxamyl is not as efficacious in controlling nematodes as
metam-sodium (Crosby 2007 and EPA 2007).  Based on this information, we
estimate a minimum of a 10% yield loss for Washington carrot acreage
currently using metam-sodium that switches to oxamyl.

Economic Benefits

In the following section we value the benefit of the use of the fumigant
metam-sodium in carrot production, the predominantly used subject soil
fumigant. This is done by comparing current carrot production to carrot
production without the use of fumigants, the result of which is reduced
yields and changed production costs.  BEAD’s estimates of the benefits
of the soil fumigants, conceptually, are the improvements in production
and/or reductions in cost resulting from the fumigants use.  The
benefits of fumigant use are shared between users of the pesticide and
consumers of carrot where consumers benefit because higher production
and/or lower costs may translate into a cheaper and more abundant supply
of carrot.

In the following section we evaluate the impact of estimated carrot
yield losses on the economic viability of carrot producers.  BEAD uses a
partial budget analysis to estimate the impacts of changes in
production.  That is, we evaluate the consequences on a typical acre of
the crop grown, rather than attempt to assess the impacts in the context
of a whole enterprise, which could include multiple crops under
cultivation.  This approach allows the Agency to compare losses to net
operating revenue, which is defined as the difference between gross
revenue and variable operating costs, on a per-acre basis.  The analysis
ignores fixed costs, which are highly dependent on land ownership and
the size and diversity of the grower’s operation, and therefore
difficult to define on a per-acre basis.  As such, this analysis may
understate the benefits of fumigation with metam-sodium as a percentage
of the grower’s income.

Estimated benefits of metam-sodium use in California and Washington
carrot production are summarized in Tables 7 and 8.

California

The best alternative control for metam-sodium in California carrot
production is dichloropropene plus linuron, mefenoxam, and azoxystrobin.
 Alternative controls would add $146 in operating costs, and would lead
to a reduction of 17% in net operating revenues, from $869 to $723.
Spread across the approximate 23,000 acres of California carrot acres
where metam-sodium is applied, this reduction is valued at approximately
$3.5 million.  However, if acres currently treated with metam-sodium
could not be treated with dichloropropene, due to regulatory
restrictions, we anticipate yield losses of 25% and increased production
costs.  These would combine for losses in net revenues of 166%. This
represents unsustainable losses to these carrot producers and would lead
them to stop carrot production on these acres.  This equals a reduction
in the value of California carrot production of about $140 million.

BEAD estimates that the value of metam-sodium use in California carrot
production ranges from $3.5 to $140 million, depending on the
availability of 1,3-dichloropropene.  These acres could be put to a
different use, such as producing a different crop, so these losses could
ultimately be less.

Table 7.  Per Acre Gross Revenue, Operating Costs, and Net Operating
Revenues, Metam-sodium and Alternatives, California Carrot Production,
Fresh Market Utilization.

	Metam-Sodium	Dichloropropene + Linuron + Mefenoxam + Azoxystrobin	No
Fumigant + Linuron + Mefenoxam + Azoxystrobin

Yield (CWT)	298	298	224

Estimated Yield Loss	0%	0%	25%

Price  per CWT	$20 	$20 	$20

Gross Revenue  	$6,079 	$6,079 	$4,559

Fumigation costs (nematodes + soil borne disease + weeds)	$1521 	$220
$0

Additional Weed Control Costs2	$0 	$18 	$18

Additional Disease Control Costs3	$0 	$60 	$60

Other Land Preparation Costs	$258 	$258 	$258

Land Preparation Costs	$410 	$556 	$336

Growing Period Costs  	$800 	$800 	$800

Harvest Costs2  	$4,000 	$4,000 	$4,000

Total Operating Costs  	$5,210 	$5,356 	$5,136

Net Operating Revenue  	$869 	$723 	($577)

Percentage Change in Net Operating Revenue	0%	17%	166%

Source:  U.C. Cooperative Extension, Sample Costs to Establish and
Produce Market Carrots Imperial County – 2004, Prepared by Herman S
Meister,   HYPERLINK
"http://www.agecon.ucdavis.edu/uploads/cost_return_articles/carrotsmkt04
.pdf"
http://www.agecon.ucdavis.edu/uploads/cost_return_articles/carrotsmkt04.
pdf .

1. Metam-sodium application costs vary by application methods.  Sprinkle
injection costs are assumed to be representative. When applied by flood,
the total cost is $189, cost of metam-sodium ($145.00) and the cost of
two field floods ($25.95 for the first and $17.95 for the second).
Application costs using sprinklers are $152 per acre.  Applied by soil
injection, total costs are $177 per acre.

2. Additional weed control costs are $18, based on estimated cost of
linuron at 0.75 pounds of active ingredient per acre.  Does not include
application costs.

3. Additional soil borne disease costs are $25 for azoxystrobin at 0.22
pounds or active ingredient per acre, and mefenoxam at $35 at 0.20
pounds of active ingredient per acre.

Washington

The best alternative control for metam-sodium in Washington carrot
production is dichloropropene plus linuron and clethodim.  The use of
these compounds would result in no yield losses, but would increase
costs by $150 per acre.  This would result in a reduction of net
operating revenue of 26%.  Given that net operating revenue does not
include fixed costs, a 26% reduction in net operating revenue may be
unsustainable for many Washington processing carrot producers.
Washington carrot producers also have oxamyl plus linuron and clethodim
available as an alternative to metam-sodium.  This combination would
result in losses in net operating revenue of a minimum of 36%, and is
not likely a viable alternative to metam-sodium.

BEAD estimates that the value of metam-sodium to Washington carrot
production that currently uses metam-sodium (1,800 acres) ranges from
$250 thousand (using dichloropropene plus linuron and clethodim) to $3.5
million (no carrot production on those acres currently using
metam-sodium).  This range depends on whether producers can maintain
profitability with the higher cost of dichloropropene plus linuron and
clethodim.  If they can not, BEAD assumes that they will cease carrot
production with the resulting loss being the total value of production
on those acres, $3.5 million.  These 1,800 acres could be put to a
different use, such as producing a different crop, so these losses may
ultimately be less.

Table 8.  Per Acre Gross Revenue, Operating Costs, and Net Operating
Revenues, Metam-sodium and Alternatives, Washington Carrot Production.

	Metam-Sodium	Dichloropropene + Linuron + Clethodim 	Oxamyl + Linuron

+ Clethodim

Yield (tons)	30	30	27

Estimated Yield Loss	0%	0%	10%

Price  per Ton	$69 	$69 	$69

Gross Revenue  	$2,096 	$2,096 	$1,886

Nematode Control Costs1 	$100 	$220 	$66

Additional Weed Control Costs	$0 	$30 	$30

Total Operating Costs2  	$1,523 	$1,673 	$1,519

Net Operating Revenue	$573 	$423 	$367

Percentage Change in Net Operating Revenue	0%	26%	36%

Source:  Washington State University Cooperative Extension, 2000 Carrot
Enterprise Budgets Columbia Basin, Washington State, Prepared by Herbert
Hinman, Erik Sorensen, and Gary Pelter.

Note: Harvesting is assumed to be done by growers and is not itemized in
the crop budgets.

1. Typical costs for dichloropropene, metam-sodium, and oxamyl are about
$220, $100, and $14-$66 per acre, respectively.  Dichloropropene costs
are comprised of a $37 application fee for soil injection, and $10.18
per gallon for 18 gallons (Crosby, 2007).

2. Costs of production vary widely across Washington.  The costs in the
table represent those for carrot production in the South Columbia Basin.

CONCLUSIONS

There are approximately 102,000 acres of carrots grown in the U.S.
annually.  Metam-sodium, the primary fumigant used in carrot production,
is applied to about 30% or 30 thousand acres.  Metam-sodium is currently
relied on for disease, weed and nematode control.

BEAD estimates the benefit of metam-sodium in California carrot
production to be about $3.5 million annually in reduced production costs
compared to fumigation with 1,3-dichloropropene and applications of
other herbicides and fungicides.  However, 1,3-dichloropropene is
subject to regulatory restrictions in California that may limit it’s
availability for use by carrot growers.  If 1,3-dichloropropene were not
available to California growers, the benefits of metam sodium could be
as much as $140 million because production on the 23,000 acres currently
using metam-sodium would not be viable.  BEAD estimates that the
benefits of metam-sodium use in Washington carrot production is at least
$250 thousand annually, resulting from the higher production costs of
using dichloropropene and additional herbicides.  However, losses could
be as high as $3.5 million if carrot production cannot continue on these
acres due to these higher production costs.  These benefits are shared
by carrot producers in terms of higher returns, and consumers in terms
of greater supply and lower carrot prices.

Limitations to assessment

This document presents the assessment of the benefits provided by the
soil fumigants in the production of carrots.  The following are
limitations of this analysis:

The assessment does not account for transition to new agronomic
practices such as introduction of new growing areas or the introduction
of newer as yet unregistered fumigants.

The assessment is based on partial budget analysis and does not account
for price or income distribution effects resulting from changes in
supply.

Yield losses based on grower experiences and crop specialist opinion.

Benefits to rotational crops are not assessed.

REFERENCES

Bolthouse Farms, 2005, Response to EPA Request for Soil fumigant Use and
Benefit Information

California Carrot Board, 2006, “Comments Issued By The California
Carrot Board And The California Tomato Commission Regarding The Metam
Sodium (EPA-HQ-OPP-2005-0125 And 1,3-Dichloropropene (EPA-HQ-2005-0124)
Risk Assessments.”  December 13, 2006.

CMCC and CFCAB, 2005, A Pest Management Strategic Plan for Fresh Carrot
Production in California, California Minor Crops Council and California
Fresh Carrot Advisory Board,   HYPERLINK
"http://www.ipmcenters.org/pmsp/pdf/CACarrot.pdf"
http://www.ipmcenters.org/pmsp/pdf/CACarrot.pdf .

Crosby, T., 2007, personal communication with Richard Michell, January
9, 2007.

EPA, 2007, EPA Proprietary Data.

Grimmway Farms. 2005, Response to EPA Request for Soil fumigant Use and
Benefit   Information

Nunez, J., 2006, E-mail Communication regarding California fumigant
target pests with Richard Michell, December 18, 2006.

USDA, 2000a, Crop Profile for Carrots in California 2000,
HYPERLINK "http://www.ipmcenters.org/cropprofiles/docs/cacarrots.html"
http://www.ipmcenters.org/cropprofiles/docs/cacarrots.html .

USDA, 2000b, Crop Profile for Carrots in Washington State 2000,

  HYPERLINK "http://cipm.ncsu.edu/cropprofiles/docs/wacarrot.html"
http://cipm.ncsu.edu/cropprofiles/docs/wacarrot.html

USDA NASS.  2002.  Census of Agriculture.  U.S. Department of
Agriculture, at   HYPERLINK
"http://www.nass.usda.gov/Census_of_Agriculture/index.asp"
http://www.nass.usda.gov/Census_of_Agriculture/index.asp .

USDA NASS.  2002-2006a.  Agricultural Prices, Summary.  National
Agricultural Statistics Service, U.S. Department of Agriculture, July,
at   HYPERLINK
"http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID
=1003"
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=
1003 .

USDA NASS.  2002-2006b.  Crop Production, Summary.  National
Agricultural Statistics Service, U.S. Department of Agriculture,
January, at   HYPERLINK
"http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID
=1047"
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=
1047 .

USDA NASS.  2005.  Agricultural Chemical Usage, 2004 Field Crops
Summary.  National Agricultural Statistics Service, U.S. Department of
Agriculture, May, at   HYPERLINK
"http://usda.mannlib.cornell.edu/usda/nass/AgriChemUsFC//2000s/2005/Agri
ChemUsFC-05-18-2005.pdf"
http://usda.mannlib.cornell.edu/usda/nass/AgriChemUsFC//2000s/2005/AgriC
hemUsFC-05-18-2005.pdf .

Washington State University, 2002, Crop Profile for Carrots in
Washington,   HYPERLINK
"http://cru84.cahe.wsu.edu/cgi-bin/pubs/MISC0361E.html"
http://cru84.cahe.wsu.edu/cgi-bin/pubs/MISC0361E.html .

 PAGE

 PAGE   4


[Federal Register Volume 86, Number 76 (Thursday, April 22, 2021)]
[Proposed Rules]
[Pages 21233-21237]
[FR Doc No: 2021-07660]

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

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2021-0306; Project Identifier MCAI-2020-01493-E]
RIN 2120-AA64

Airworthiness Directives; Rolls-Royce Deutschland Ltd & Co KG
(Type Certificate Previously Held by Rolls-Royce plc) Turbofan Engines

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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

SUMMARY: The FAA proposes to supersede Airworthiness Directive (AD)
2020-15-12, which applies to certain Rolls-Royce Deutschland Ltd & Co
KG (RRD) Trent 1000 model turbofan engines. AD 2020-15-12 requires
initial and repetitive ultrasonic or visual inspections of the
intermediate-pressure compressor (IPC) stage 1 rotor blade root (front
face), IPC stage 2 rotor blade root (front and rear face), and IPC
shaft stage 2 dovetail post (front face), and removal of any cracked
parts from service. AD 2020-15-12 also requires an inspection after
asymmetric power and cabin depressurization events. Since the FAA
issued AD 2020-15-12, the manufacturer introduced IPC stage 1 and stage
2 rotor blades in kitted sets, which terminate the need for initial and
repetitive ultrasonic or visual inspections for certain IPC parts. This
proposed AD would continue to require initial and repetitive ultrasonic
or visual inspections of certain IPC parts until replacement of the IPC
stage 1 and stage

2 rotor blades with redesigned IPC stage 1 and stage 2 rotor blades in
kitted sets. The FAA is proposing this AD to address the unsafe
condition on these products.

DATES: The FAA must receive comments on this proposed AD by June 7,
2021.

ADDRESSES: You may send comments, using the procedures found in 14 CFR
11.43 and 11.45, by any of the following methods:
     Federal eRulemaking Portal: Go to https://www.regulations.gov. Follow the instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
     Hand Delivery: Deliver to Mail address above between 9
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    For service information identified in this NPRM, contact Rolls-
Royce plc, Corporate Communications, P.O. Box 31, Derby, DE24 8BJ,
United Kingdom; phone: +44 (0)1332 242424; fax: +44 (0)1332 249936;
email: https://www.rolls-royce.com/contact-us/civil-aerospace.aspx;
website: https://www.rolls-royce.com/contact-us.aspx. You may view this
service information at the FAA, Airworthiness Products Section,
Operational Safety Branch, 1200 District Avenue, Burlington, MA 01803.
For information on the availability of this material at the FAA, call
(781) 238-7759.

Examining the AD Docket

    You may examine the AD docket at https://www.regulations.gov by
searching for and locating Docket No. FAA-2021-0306; or in person at
Docket Operations between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays. The AD docket contains this NPRM, the
mandatory continuing airworthiness information (MCAI), any comments
received, and other information. The street address for Docket
Operations is listed above.

FOR FURTHER INFORMATION CONTACT: Kevin Clark, Aviation Safety Engineer,
ECO Branch, FAA, 1200 District Avenue, Burlington, MA 01803; phone:
(781) 238-7088; fax:<PHONE_NUMBER>; email<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Comments Invited

    The FAA invites you to send any written relevant data, views, or
arguments about this proposal. Send your comments to an address listed
under ADDRESSES. Include ``Docket No. FAA-2021-0306; Project Identifier
MCAI-2020-01493-E'' at the beginning of your comments. The most helpful
comments reference a specific portion of the proposal, explain the
reason for any recommended change, and include supporting data. The FAA
will consider all comments received by the closing date and may amend
this NPRM because of those comments.
    Except for Confidential Business Information (CBI) as described in
the following paragraph, and other information as described in 14 CFR
11.35, the FAA will post all comments received, without change, to
https://www.regulations.gov, including any personal information you
provide. The agency will also post a report summarizing each
substantive verbal contact received about this proposed AD.

Confidential Business Information

    CBI is commercial or financial information that is both customarily
and actually treated as private by its owner. Under the Freedom of
Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public
disclosure. If your comments responsive to this NPRM contain commercial
or financial information that is customarily treated as private, that
you actually treat as private, and that is relevant or responsive to
this NPRM, it is important that you clearly designate the submitted
comments as CBI. Please mark each page of your submission containing
CBI as ``PROPIN.'' The FAA will treat such marked submissions as
confidential under the FOIA, and they will not be placed in the public
docket of this NPRM. Submissions containing CBI should be sent to Kevin
Clark, Aviation Safety Engineer, ECO Branch, FAA, 1200 District Avenue,
Burlington, MA 01803. Any commentary that the FAA receives which is not
specifically designated as CBI will be placed in the public docket for
this rulemaking.

Background

    The FAA issued AD 2020-15-12, Amendment 39-21175 (85 FR 45081, July
27, 2020), (AD 2020-15-12), for certain RRD Trent 1000-A2, Trent 1000-
AE2, Trent 1000-C2, Trent 1000-CE2, Trent 1000-D2, Trent 1000-E2, Trent
1000-G2, Trent 1000-H2, Trent 1000-J2, Trent 1000-K2, and Trent 1000-L2
model turbofan engines. AD 2020-15-12 was prompted by IPC rotor blade
separations resulting in engine failures. Subsequently, the
manufacturer identified the need to add new inspections and an optional
terminating action, amend the asymmetric power condition for engine
inspection, and to add an inspection after a cabin depressurization
event. AD 2020-15-12 requires initial and repetitive ultrasonic or
visual inspections of the IPC stage 1 rotor blade root (front face),
IPC stage 2 rotor blade root (front and rear face), and IPC shaft stage
2 dovetail posts (front face), and removal of any cracked parts from
service. AD 2020-15-12 also requires an inspection after asymmetric
power and cabin depressurization events. The agency issued AD 2020-15-
12 to prevent failure of the IPC rotor blades.

Actions Since AD 2020-15-12 Was Issued

    Since the FAA issued AD 2020-15-12, the European Union Aviation
Safety Agency (EASA), which is the Technical Agent for the Member
States of the European Community, has issued EASA AD 2020-0240, dated
November 5, 2020 (referred to after this as ``the MCAI''), to address
the unsafe condition on these products. The MCAI states:
    Occurrences were reported on Rolls-Royce Trent 1000 `Pack C'
engines, where some IPC Rotor 1 and Rotor 2 blades were found cracked.
    This condition, if not detected and corrected, could lead to in-
flight blade release, possibly resulting in reduced control of the
aeroplane.
    To address this potential unsafe condition, Rolls-Royce initially
issued Alert NMSB TRENT 1000 72-AJ814 and 72-AJ819 to provide
inspection instructions for IPC Rotor 1 blades, and IPC Rotor 2 blades
and IPC shaft Stage 2 dovetail posts, respectively. Rolls-Royce also
issued NMSB TRENT 1000 72-J871 to provide rework instructions for the
affected parts, and Alert NMSB TRENT 1000 72-AJ869 to inspect those
post-rework parts.
    Consequently, EASA issued AD 2017-0248 to require repetitive
inspections of the affected IPC Rotor blades and IPC shaft Stage 2
dovetail posts and, depending on findings, removal from service of the
engine for corrective action.
    After that [EASA] AD was issued, Rolls-Royce issued Alert NMSB
TRENT 1000 72-AK058 to provide instructions for a one-time on-wing
inspection. Consequently, EASA issued AD 2018-0073, retaining the
requirements of EASA AD 2017-0248, which was superseded, to require an
additional borescope inspection of certain engines and, depending on
findings, removal from service of the engine for corrective action.
    After that [EASA] AD was issued, it was determined that repetitive
borescope inspections are necessary on all engines to ensure fleet-wide

continued safe operation. Consequently, Rolls-Royce revised Alert NMSB
TRENT 1000 72-AJ869, Alert NMSB TRENT 1000 72-AJ814, Alert NMSB TRENT
1000 72-AJ819 and NMSB TRENT 1000 72-J871, and issued NMSB TRENT 1000
72-AK060 to consolidate all inspection instructions. Consequently, EASA
issued AD 2018-0084 (later revised), retaining the requirements of EASA
AD 2018-0073, which was superseded, and requiring repetitive on-wing
borescope inspections of the affected Rotor 1 parts and affected Rotor
2 parts and, depending on findings, removal from service of the engine
for corrective action. That AD also introduced specific requirements
for engines installed on aeroplanes involved in ETOPS, and inspection
following operation in asymmetric power conditions.
    Rolls-Royce then introduced NMSB Trent 1000 72-AK092 to provide
inspections for the rear face of the Rotor 2 blades and NMSB TRENT 1000
72-AK060 was revised (R1) accordingly. Later, Rolls-Royce developed mod
72-J941, installing improved IPC Stage 1 and Stage 2 rotor blades, and
issued the modification SB, providing the necessary instructions for
in-service application. EASA issued AD 2018-0084R2 to exclude post-mod
72-J941 engines from the Applicability and introducing the modification
SB as terminating action for the repetitive inspections as required by
that [EASA] AD.
    After that [EASA] AD was issued, Rolls-Royce issued NMSB TRENT 1000
72-AK313 and revised Alert NMSB TRENT 1000 72-AJ814, 72-AJ819 and 72-
AK092 to introduce new inspections, new thresholds and new intervals,
depending on engine configuration. These inspections are for all
operations, ETOPS and non-ETOPS. The latest revision of the NMSB also
amended the asymmetric power conditions for engine inspection and
introduced cabin depressurisation as an event to trigger engine
inspection(s). Consequently, EASA issued AD 2019-0250 to require
introduction of the new inspections, replacing those previously imposed
by EASA AD 2018-0084R2 (through NMSB TRENT 1000 72-AK060), and to
remove the references to Engine Health Monitoring messages and ETOPS-
related requirements.
    Since that [EASA] AD was issued, it was discovered that the
manufacturing distribution of the individual blade frequencies could
differ from the assumed values during certification of the SB TRENT
1000 72-J941, which means there may not be sufficient margin to prevent
the blades from experiencing high vibration levels. Prompted by these
findings, Rolls-Royce issued the modification SB to provide blade
kitting instructions.
    You may obtain further information by examining the MCAI in the AD
docket at https://www.regulations.gov by searching for and locating
Docket No. FAA-2021-0306.

FAA's Determination

    This product has been approved by EASA and is approved for
operation in the United States. Pursuant to our bilateral agreement
with the European Community, EASA has notified the FAA of the unsafe
condition described in the MCAI and service information. The FAA is
issuing this NPRM because the agency evaluated all the relevant
information provided by EASA and determined the unsafe condition
described previously is likely to exist or develop in other products of
the same type design.

Related Service Information Under 1 CFR Part 51

    The FAA reviewed Rolls-Royce Alert Non-Modification Service
Bulletin (NMSB) Trent 1000 72-AK313, Revision 1, dated August 22, 2019;
and Rolls-Royce Alert Service Bulletin (SB) Trent 1000 72-AK430,
Initial Issue, dated August 17, 2020. Rolls-Royce Alert NMSB Trent 1000
72-AK313 defines the initial inspection threshold and repeat inspection
intervals for Trent 1000 IPC stage 1 rotor blade, IPC stage 2 rotor
blade, and IPC shaft stage 2 dovetail posts. Rolls-Royce Alert SB Trent
1000 72-AK430 introduces the IPC stage 1 and stage 2 rotor blades in
kitted sets and provides kitting instructions. This service information
is reasonably available because the interested parties have access to
it through their normal course of business or by the means identified
in ADDRESSES.

Other Related Service Information

    The FAA reviewed Rolls-Royce Alert NMSB Trent 1000 72-AJ814,
Revision 5, dated May 3, 2019; Rolls-Royce Alert NMSB Trent 1000 72-
AJ819, Revision 4, dated May 3, 2019; Rolls-Royce Alert NMSB Trent 1000
72-AK092, Revision 4, dated May 3, 2019; Rolls-Royce SB Trent 1000 72-
J871, Revision 6, dated December 12, 2019; and Rolls-Royce SB Trent
1000 72-J941, Revision 1, dated February 6, 2019.
    Rolls-Royce Alert NMSB Trent 1000 72-AJ814 describes procedures for
performing an ultrasonic inspection (USI) of the IPC stage 1 rotor
blades. Rolls-Royce Alert NMSB Trent 1000 72-AJ819 describes procedures
for performing a visual borescope inspection of the IPC stage 2 rotor
blades and IPC shaft stage 2 dovetail posts. Rolls-Royce Alert NMSB
Trent 1000 72-AK092 describes procedures for performing a USI of the
IPC stage 2 rotor blades. Rolls-Royce SB Trent 1000 72-J871 describes
procedures for reworking or replacing the affected parts. Rolls-Royce
SB Trent 1000 72-J941 describes procedures for installing the
redesigned IPC stage 1 and stage 2 rotor blades.

Proposed AD Requirements in This NPRM

    This proposed AD would retain certain requirements of AD 2020-15-
12. This proposed AD would continue to require initial and repetitive
ultrasonic or visual inspection of the IPC stage 1 rotor blade root
(front face), IPC stage 2 rotor blade root (front and rear face), and
IPC shaft stage 2 dovetail post (front face), removal of any cracked
parts from service, and an inspection after asymmetric power and cabin
depressurization events until the installation of the IPC stage 1 and
stage 2 rotor blades in kitted sets. As a terminating action, this AD
would require replacement of IPC stage 1 and stage 2 rotor blades with
IPC stage 1 and stage 2 rotor blades in kitted sets.

Costs of Compliance

    The FAA estimates that this AD, if adopted as proposed, would
affect 7 engines installed on airplanes of U.S. registry.
    The FAA estimates the following costs to comply with this proposed
AD:

                                                 Estimated Costs
----------------------------------------------------------------------------------------------------------------
                                                                                Cost per      Cost on U.S.
                Action                         Labor cost           Parts cost        product        operators
----------------------------------------------------------------------------------------------------------------
Inspect the IPC stage 1 rotor blade     20 work-hours x $85 per               $0          $1,700         $11,900
 root (Front Face).                      hour = $1,700.

Inspect the IPC stage 2 rotor blade     6 work-hours x $85 per                 0             510           3,570
 root (Front Face) and IPC shaft stage   hour = $510.
 2 dovetail post (Front Face).
Inspect the IPC stage 2 rotor blade     10 work-hours x $85 per                0             850           5,950
 root (Rear Face).                       hour = $850.
Replace all 34 IPC stage 1 rotor        280 work-hours x $85 per          52,360          76,160         533,120
 blades (mandatory terminating action).  hour = $23,800.
Replace all 49 IPC stage 2 rotor        280 work-hours x $85 per          48,755          72,555         507,885
 blades (mandatory terminating action).  hour = $23,800.
----------------------------------------------------------------------------------------------------------------

    The FAA estimates the following costs to do any necessary
replacements that would be required based on the results of the
proposed inspection. The agency has no way of determining the number of
aircraft that might need these replacements:

                                               On-Condition Costs
----------------------------------------------------------------------------------------------------------------
                                                                                Cost per
                    Action                                 Labor cost               Parts cost        product
----------------------------------------------------------------------------------------------------------------
Replace all 34 IPC stage 1 rotor blades.......  280 work-hours x $85 per hour =          $52,360         $76,160
                                                 $23,800.
Replace all 49 IPC stage 2 rotor blades.......  280 work-hours x $85 per hour =           48,755          72,555
                                                 $23,800.
Replace the IPC drum assembly.................  144 work-hours x $85 per hour =        1,370,000       1,382,240
                                                 $12,240.
----------------------------------------------------------------------------------------------------------------

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, Section 106, describes the
authority of the FAA Administrator. Subtitle VII, Aviation Programs,
describes in more detail the scope of the Agency's authority.
    The FAA is issuing this rulemaking under the authority described in
Subtitle VII, Part A, Subpart III, Section 44701, General requirements.
Under that section, Congress charges the FAA with promoting safe flight
of civil aircraft in air commerce by prescribing regulations for
practices, methods, and procedures the Administrator finds necessary
for safety in air commerce. This regulation is within the scope of that
authority because it addresses an unsafe condition that is likely to
exist or develop on products identified in this rulemaking action.

Regulatory Findings

    The FAA has determined that this proposed AD would not have
federalism implications under Executive Order 13132. This proposed AD
would not have a substantial direct effect 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.
    For the reasons discussed above, I certify that the proposed
regulation:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866,
    (2) Would not affect intrastate aviation in Alaska, and
    (3) Would not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.

The Proposed Amendment

    Accordingly, under the authority delegated to me by the
Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

PART 39--AIRWORTHINESS DIRECTIVES

0
1. The authority citation for part 39 continues to read as follows:

    Authority:  49 U.S.C. 106(g), 40113, 44701.

Sec.  39.13   [Amended]

0
2. The FAA amends Sec.  39.13 by:
0
a. Removing Airworthiness Directive AD 2020-15-12, Amendment 39-21175
(85 FR 45081, July 27, 2020); and
0
b. Adding the following new airworthiness directive:

Rolls-Royce Deutschland Ltd & Co KG (Type Certificate previously
held by Rolls-Royce plc): Docket No. FAA-2021-0306; Project
Identifier MCAI-2020-01493-E.

(a) Comments Due Date

    The FAA must receive comments on this airworthiness directive
(AD) action by June 7, 2021.

(b) Affected ADs

    This AD replaces AD 2020-15-12, Amendment 39-21175 (85 FR 45081,
July 27, 2020).

(c) Applicability

    This AD applies to Rolls-Royce Deutschland Ltd & Co KG (Type
Certificate previously held by Rolls-Royce plc) Trent 1000-A2, Trent
1000-AE2, Trent 1000-C2, Trent 1000-CE2, Trent 1000-D2, Trent 1000-
E2, Trent 1000-G2, Trent 1000-H2, Trent 1000-J2, Trent 1000-K2, and
Trent 1000-L2 model turbofan engines, except those that have the
redesigned intermediate-pressure compressor (IPC) stage 1 and stage
2 rotor blades introduced by Rolls-Royce (RR) Service Bulletin (SB)
Trent 1000 72-J941, Initial Issue, dated December 6, 2016, or
Revision 1, dated February 6, 2019.

(d) Subject

    Joint Aircraft System Component (JASC) Code 7230, Turbine Engine
Compressor Section.

(e) Unsafe Condition

    This AD was prompted by IPC rotor blade separations resulting in
engine failures. The FAA is issuing this AD to prevent failure of
the IPC. The unsafe condition, if not addressed, could result in
failure of one or more engines, loss of thrust control, and loss of
the airplane.

(f) Compliance

    Comply with this AD within the compliance times specified,
unless already done.

(g) Required Actions

    (1) After the effective date of this AD, before exceeding the
initial inspection thresholds and repeat inspection intervals
specified in Table 1 of RR Alert Non-Modification Service Bulletin
(NMSB) Trent 1000 72-AK313, Revision 1, dated August 22, 2019 (RR
NMSB Trent 1000 72-AK313 R1):
    (i) Perform initial ultrasonic inspections (USIs) of the IPC
stage 1 rotor blade root (front face).
    (ii) Thereafter, perform repetitive USIs of the IPC stage 1
rotor blade root (front face).
    (iii) Use the Accomplishment Instructions, paragraph 3.A.(1)(a)
(on-wing) or 3.A.(2)(a) and (b) (in-shop), of RR NMSB Trent 1000 72-
AK313 R1 to perform the inspections.
    (2) After the effective date of this AD, before exceeding the
initial inspection thresholds and repeat inspection intervals
specified in Table 2 of RR NMSB Trent 1000 72-AK313 R1:
    (i) Perform initial visual inspections of the IPC stage 2 rotor
blade root (front face) and IPC shaft stage 2 dovetail post (front
face).
    (ii) Thereafter, perform repetitive visual inspections of the
IPC stage 2 rotor blade root (front face) and IPC shaft stage 2
dovetail post (front face).
    (iii) Use the Accomplishment Instructions, paragraph 3.B.(1)(a)
(on-wing) or 3.B.(2)(b) (in-shop), of RR NMSB Trent 1000 72-AK313 R1
to perform the inspections.
    (3) After the effective date of this AD, before exceeding the
initial inspection threshold and repeat inspection intervals
specified in Table 2 of RR NMSB Trent 1000 72-AK313 R1:
    (i) Perform initial USIs of IPC stage 2 rotor blade root (rear
face).
    (ii) Thereafter, perform repetitive USIs of IPC stage 2 rotor
blade root (rear face).
    (iii) Use the Accomplishment Instructions, paragraph 3.C.(1)(a)
(on-wing) or 3.C.(2)(a) (in-shop), of RR NMSB Trent 1000 72-AK313 R1
to perform the inspections.
    (4) After the effective date of this AD, within 5 engine flight
cycles (FCs) after each occurrence in which any engine operates in
asymmetric power conditions at an altitude of less than 28,000 feet,
perform the following inspections on the engine not affected by the
power reduction or in-flight shutdown (IFSD):
    (i) Perform initial USIs and visual inspections required by
paragraphs (g)(1) through (3) of this AD.
    (ii) Thereafter, perform the repetitive USIs and visual
inspections required by paragraphs (g)(1) through (3) of this AD.
    (iii) Use the service information and repetitive inspection
thresholds required by paragraphs (g)(1)(iii), (2)(iii), and
(3)(iii) to perform the inspections, as applicable.
    (5) After the effective date of this AD, within 5 engine FCs
following a cabin depressurization event, perform the following
inspections on both engines installed on the airplane:
    (i) Perform initial USIs and visual inspections required by
paragraphs (g)(1) through (3) of this AD.
    (ii) Thereafter, perform the repetitive USIs and visual
inspections required by paragraphs (g)(1) through (3) of this AD.
    (iii) Use the service information and repetitive inspection
thresholds required by paragraphs (g)(1)(iii), (2)(iii), and
(3)(iii) to perform the inspections, as applicable.
    (6) If any IPC stage 1 rotor blade root (front face), IPC stage
2 rotor blade root (front face), or IPC stage 2 rotor blade root
(rear face) is found cracked during any inspection required by this
AD, replace the part with a part eligible for installation before
further flight.
    (7) If any IPC shaft stage 2 dovetail post (front face) is found
cracked during any inspection required by this AD, replace the IPC
drum assembly.

(h) Mandatory Terminating Action

    At the next engine shop visit after the effective date of this
AD, replace the IPC stage 1 and stage 2 rotor blades with redesigned
IPC stage 1 and stage 2 rotor blades introduced by RR SB Trent 1000
72-J941, Revision 1, dated February 6, 2019. Install the blades as
kitted sets using the Accomplishment Instructions, paragraph 3.C.
(In-Shop), of RR Alert SB Trent 1000 72-AK430, Initial Issue, dated
August 17, 2020. This replacement of the IPC stage 1 and stage 2
rotor blades as kitted sets is a terminating action for the initial
and repetitive ultrasonic or visual inspection requirements, as
applicable, required by paragraphs (g)(1) through (5) of this AD.

(i) Definitions

    (1) For the purpose of this AD, an ``asymmetric power
condition'' is the operation of the airplane at an altitude of less
than 28,000 feet, experiencing either single engine take-off, engine
fault (reduced power on one engine), or single engine IFSD, which
includes execution of any non-normal checklist procedure.
    (2) For the purpose of this AD, an ``engine shop visit'' is the
induction of an engine into the shop for maintenance involving the
separation of pairs of major mating engine case flanges, except that
the separation of engine flanges solely for the purposes of
transportation without subsequent engine maintenance does not
constitute an engine shop visit.

(j) Credit for Previous Actions

    You may take credit for the initial inspections required by
paragraphs (g)(1) through (5) of this AD if you performed these
inspections before the effective date of this AD using any of the
following.
    (1) RR Alert NMSB Trent 1000 72-AJ819, Revision 3, dated April
13, 2018, or earlier revisions;
    (2) RR Alert NMSB Trent 1000 72-AJ814, Revision 4, dated
September 28, 2018, or earlier revisions;
    (3) RR Alert NMSB Trent 1000 72-AK313, Initial Issue, dated May
2, 2019; or
    (4) RR Alert NMSB Trent 1000 72-AK092, Revision 3, dated
February 28, 2019, or earlier revisions.

(k) Special Flight Permit

    Special flight permits, as described in Section 21.197 and
Section 21.199 of the Federal Aviation Regulations (14 CFR 21.197
and 21.199), are subject to the requirements of paragraph (k)(1) of
this AD.
    (1) Operators who are prohibited from further flight due to a
crack finding as a result of paragraph (g) of this AD, may perform a
one-time non-revenue ferry flight to a location where the engine can
be removed from service. This ferry flight must be performed without
passengers, involve non-ETOPS operation, and consume no more than
three FCs.
    (2) [Reserved]

(l) Alternative Methods of Compliance (AMOCs)

    (1) The Manager, ECO Branch, FAA, has the authority to approve
AMOCs for this AD, if requested using the procedures found in 14 CFR
39.19. In accordance with 14 CFR 39.19, send your request to your
principal inspector or local Flight Standards District Office, as
appropriate. If sending information directly to the manager of the
certification office, send it to the attention of the person
identified in Related Information. You may email your request to:
<EMAIL_ADDRESS>    (2) Before using any approved AMOC, notify your appropriate
principal inspector, or lacking a principal inspector, the manager
of the local flight standards district office/certificate holding
district office.

(m) Related Information

    (1) For more information about this AD, contact Kevin Clark,
Aviation Safety Engineer, ECO Branch, FAA, 1200 District Avenue,
Burlington, MA 01803; phone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>;
email<EMAIL_ADDRESS>    (2) Refer to European Union Aviation Safety Agency (EASA) AD
2020-0240, dated November 5, 2020, for more information. You may
examine the EASA AD in the AD docket at https://www.regulations.gov
by searching for and locating it in Docket No. FAA-2021-0306.
    (3) For service information identified in this AD, contact
Rolls-Royce plc, Corporate Communications, P.O. Box 31, Derby, DE24
8BJ, United Kingdom; phone: +44 (0)1332 242424; fax: +44 (0)1332
249936; email: https://www.rolls-royce.com/contact-us/civil-aerospace.aspx; website: https://www.rolls-royce.com/contact-us.aspx. You may view this referenced service information at the
FAA, Airworthiness Products Section, Operational Safety Branch, 1200
District Avenue, Burlington, MA 01803. For information on the
availability of this material at the FAA, call<PHONE_NUMBER>.

    Issued on April 9, 2021.
Lance T. Gant,
Director, Compliance & Airworthiness Division, Aircraft Certification
Service.
[FR Doc. 2021-07660 Filed 4-21-21; 8:45 am]
BILLING CODE 4910-13-P


[Federal Register Volume 84, Number 205 (Wednesday, October 23, 2019)]
[Notices]
[Pages 56860-56864]
[FR Doc No: 2019-23052]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87330; File No. SR-NYSE-2019-53]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Price List To Add an Additional Step Up Credit Tier

October 17, 2019.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on October 1, 2019, New York Stock Exchange LLC (``NYSE''
or the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend its Price List to adopt a new
pricing tier, the Step Up Tier 2 Adding Credit, in Tape A securities.
The proposed rule change is available on the Exchange's website at
www.nyse.com, at the principal office of the Exchange, 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 self-regulatory organization
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 those 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 parts of such statements.

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

1. Purpose
    The Exchange proposes to amend its Price List to adopt a new
pricing tier, the Step Up Tier 2 Adding Credit, in Tape A securities.
    The proposed changes respond to the current competitive environment
where order flow providers have a choice of where to direct liquidity-
providing orders by offering further incentives for member
organizations to send additional displayed liquidity to the Exchange.
    The Exchange proposes to implement the fee changes effective
October 1, 2019.
Competitive Environment
    The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \4\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS'').
---------------------------------------------------------------------------

    As the Commission itself recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\5\ Indeed, equity trading is currently dispersed across 13
exchanges,\6\ 31 alternative trading systems,\7\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow.
Based on publicly-available information, no single exchange has more
than 18% market share (whether including or excluding auction
volume).\8\ Therefore, no exchange possesses significant pricing power
in the execution of equity order flow. More specifically, for the month
of August 2019, the Exchange's market share of intraday trading (i.e.,
excluding auctions) in Tapes A, B and C securities was only 9.3%.\9\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 51808, 84 FR 5202,
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
    \6\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at http://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
    \7\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of
alternative trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/atslist.htm.
    \8\ See Cboe Global Markets U.S. Equities Market Volume Summary,
available at http://markets.cboe.com/us/equities/market_share/.
    \9\ See id.
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
move order flow, or discontinue or reduce use of certain categories of
products, in response to fee changes. With respect to non-marketable
order flow that would provide displayed liquidity on an Exchange,
member organizations can choose from any one of the 13 currently
operating registered exchanges to route such order flow. Accordingly,
competitive forces constrain exchange transaction fees that relate to
orders that would provide liquidity on an exchange.
    In response to this competitive environment, the Exchange has
established incentives for its member organizations who submit orders
that provide liquidity on the Exchange. The proposed fee change is
designed to attract additional order flow to the Exchange by offering a
new pricing tier to incentivize member organizations to step up their
liquidity-providing orders on the Exchange on all tapes.

Proposed Rule Change
    The Exchange proposes to adopt a ``Step Up Tier 2 Adding Credit''
that would offer a higher credit to member organizations that qualify
for the tier. The proposed tier would also offer an additional credit
for member organizations providing displayed liquidity in Tapes B and C
securities.\10\
---------------------------------------------------------------------------

    \10\ The Exchange proposes several non-substantive conforming
changes to the existing Step Up Tier Adding Credit. First, the
existing tier would be re-numbered ``Step Up Tier 1 Adding Credit.''
Second, romanette (i) would be moved so as to make the phrase ``has
Adding ADV, excluding any liquidity added by a DMM, that is'' in
romanette (ii) redundant, and the phrase would accordingly be
deleted. Third, the outdated reference to ``Non-Display Reserve
order'' would be replaced with ``Non-Displayed Limit Orders,'' which
is the current usage in Rule 7.31(d)(2). Finally, the outdated
phrase ``traded pursuant to Unlisted Trading Privileges (Tapes B and
C) on the Pillar Trading Platform'' would be replaced with ``Tapes B
and C Securities,'' and the ``s'' in securities would be
capitalized. These last two changes would be reflected in the
proposed Step Up Tier 2 Adding Credit.
---------------------------------------------------------------------------

    As proposed, a member organization that sends orders, except Mid-
Point Liquidity Orders (``MPL'') and Non-Displayed Limit Orders, that
add liquidity (``Adding ADV'') in Tape A securities would receive a
credit of $0.0029 if:
     The member organization quotes at least 15% of the
National Best Bid or Offer (``NBBO'') \11\ in 300 or more Tape A
securities on a monthly basis, and
---------------------------------------------------------------------------

    \11\ See Rule 1.1(q) (defining ``NBBO'' to mean the national
best bid or offer).
---------------------------------------------------------------------------

     The member organization's Adding ADV as a percentage of
NYSE consolidated average daily volume (``CADV''),\12\ excluding any
orders by a Designated Market Maker (``DMM''), is at least two times
more than the member organization's July 2019 Adding ADV as a
percentage of NYSE CADV, and
---------------------------------------------------------------------------

    \12\ The terms ``ADV'' and ``CADV'' are defined in footnote * of
the Price List.
---------------------------------------------------------------------------

     the member organization's Adding ADV as a percentage of
NYSE CADV, excluding any liquidity added by a DMM, exceeds that member
organization's Adding ADV in July 2019 taken as a percentage of NYSE
CADV as follows:
     For the billing month of October 2019, an Adding ADV,
excluding any liquidity added by a DMM, that is at least 0.35% of NYSE
CADV over that member organization's July 2019 Adding ADV taken as a
percentage of NYSE CADV.
     For the billing month of November 2019, an Adding ADV,
excluding any liquidity added by a DMM, that is at least 0.70% of NYSE
CADV over that member organization's July 2019 Adding ADV taken as a
percentage of NYSE CADV.
     For the billing month of December 2019 and for every month
thereafter, an Adding ADV, excluding any liquidity added by a DMM, that
is at least 1.05% of NYSE CADV over that member organization's July
2019 Adding ADV taken as a percentage of NYSE CADV.
    In addition, a member organization that meets these requirements,
and thus qualifies for the $0.0029 credit in Tape A securities, would
be eligible to receive an additional $0.00005 per share if trades in
Tapes B and C securities against the member organization's orders that
add liquidity, excluding orders as a Supplemental Liquidity Provider
(``SLP''), equal to at least 0.20% of Tape B and Tape C CADV combined.
The proposed additional credit mirrors the additional credits offered
in current Tier 1, Tier 2, Tier 3 and Tier 4 for trades in Tapes B and
C securities against a member organization's orders that add liquidity,
excluding orders as an SLP, equal to at least a specified percentage of
Tape B and Tape C CADV combined.
    For example, member organization A has an Adding ADV of 12 million
shares when NYSE CADV (Tape A) was 3.0 billion, or 0.40% of NYSE CADV
in all Tape A securities, in the baseline month of July 2019 (the
``Baseline Month''). Member organization A also has an Adding ADV of
0.75% of US CADV in Tape A securities in October 2019.
    Based on the foregoing, member organization A would meet the 0.35%
step up requirement for October 2019 but fall short of the two times
Adding ADV as a percentage of NYSE CADV requirement in order to qualify
for the proposed tier. In order to qualify for the proposed rate in
October 2019, member organization A would need two times its 0.40% of
NYSE CADV in the Baseline Month or at least 0.80% of NYSE CADV. In
order to qualify for the proposed rate in November 2019, member
organization A would need at least 1.10% share of NYSE CADV. In order
to qualify for December 2019 and subsequent months, member organization
A would need at least 1.45% share.
    If member organization B had an Adding ADV of 0.05% of NYSE CADV in
the Baseline Month, that firm would need an Adding ADV share of NYSE
CADV of at least 0.40% in October 2019, 0.75% in November 2019, and
1.10% in December 2019 and onward in order to qualify for the proposed
rate. By meeting the percentage CADV step up requirement in the
respective billing months, member organization B with a smaller Adding
ADV would also meet the two times Adding ADV as a percent of NYSE
requirement.
    The purpose of this proposed change is to incentivize member
organizations to increase the liquidity-providing orders in Tape A
securities they send to the Exchange, which would support the quality
of price discovery on the Exchange and provide additional price
improvement opportunities for incoming orders. The Exchange believes
that by correlating the amount of the credit to the level of orders
sent by a member organization that add liquidity, the Exchange's fee
structure would incentivize member organizations to submit more orders
that add liquidity to the Exchange, thereby increasing the potential
for price improvement to incoming marketable orders submitted to the
Exchange.
    The Exchange proposes a higher credit under the proposed Step Up
Tier 2 compared with the current Step Up Tier to provide an incentive
for member organizations to send more orders because they would then
qualify for the credit. As noted above, the Exchange operates in a
competitive environment, particularly as it relates to attracting non-
marketable orders, which add liquidity to the Exchange. Because, as
proposed, the tier requires a member organization to increase the
volume of its trades against orders that add liquidity over that member
organization's July 2019 baseline at increasing levels in October 2019,
November 2019, December 2019 and thereafter at the December 2019 level,
the Exchange believes that the proposed higher credit would provide an
incentive for member organizations to route additional liquidity to the
Exchange in order to qualify for it.
    The Exchange does not know how much order flow member organizations
choose to route to other exchanges or to off-exchange venues. There are
currently no firms that could qualify for the proposed higher Step Up
Tier 2 Adding Credit based on their current trading profile on the
Exchange, but believes that at least 8 member organizations could
qualify for the tier if they so choose. However, without having a view
of member organization's activity on other exchanges and off-exchange
venues, the Exchange has no way of knowing whether this proposed rule
change would result in any member organization directing orders to the
Exchange in order to qualify for the new tier.
    Each of the proposed changes are not otherwise intended to address
other issues, and the Exchange is not aware of any significant problems
that market participants would have in complying with the proposed
changes.

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\13\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\14\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4) & (5).
---------------------------------------------------------------------------

The Proposed Change Is Reasonable
    As discussed above, the Exchange operates in a highly fragmented
and competitive market. The Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues and, also, recognized
that current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \15\
---------------------------------------------------------------------------

    \15\ See Regulation NMS, 70 FR at 37499.
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
move order flow, or discontinue or reduce use of certain categories of
products, in response to fee changes. With respect to non-marketable
orders which provide liquidity on an Exchange, member organizations can
choose from any one of the 13 currently operating registered exchanges
to route such order flow. Accordingly, competitive forces constrain
exchange transaction fees that relate to orders that would provide
displayed liquidity on an exchange. Stated otherwise, changes to
exchange transaction fees can have a direct effect on the ability of an
exchange to compete for order flow.
    Given this competitive environment, the proposal represents a
reasonable attempt to attract additional order flow to the Exchange. As
noted, the Exchange's market share of intraday trading (i.e., excluding
auctions) for the month of August 2019, in Tapes A, B and C securities
was only 9.3%.\16\
---------------------------------------------------------------------------

    \16\ See notes 8-9 supra.
---------------------------------------------------------------------------

    Specifically, the Exchange believes that the proposed Step Up Tier
2 would provide an incentive for member organizations to route
additional liquidity-providing orders to the Exchange in Tape A
securities. As noted above, the Exchange operates in a highly
competitive environment, particularly for attracting non-marketable
order flow that provides liquidity on an exchange. The Exchange
believes it is reasonable to provide a higher credit for orders that
provide additional liquidity. The Exchange believes that requiring
member organizations to quote at least 15% of the NBBO in 300 or more
securities on a monthly basis in order to qualify for the proposed Step
Up Tier 2 Adding Credit is reasonable because it would encourage
additional displayed liquidity on the Exchange and because market
participants benefit from the greater amounts of displayed liquidity
present on the Exchange. Similarly, the Exchange believes that it is
reasonable to provide an incremental credit to member organizations
that meet the requirements of the Step Up Tier that add additional
liquidity in UTP securities on Pillar.
    Since the proposed Step Up Tier 2 would be new with a requirement
for increased Adding ADV over the baseline month, no member
organization currently qualifies for the proposed pricing tier. As
previously noted, there are a number of member organizations that could
qualify for the proposed higher credit but without a view of member
organization activity on other exchanges and off-exchange venues, the
Exchange has no way of knowing whether the proposed rule change would
result in any member organization qualifying for the tier. The Exchange
believes the proposed higher credit is reasonable as it would provide
an additional incentive for member organizations to direct their order
flow to the Exchange and provide meaningful added levels of liquidity
in order to qualify for the higher credit, thereby contributing to
depth and market quality on the Exchange.
The Proposal Is an Equitable Allocation of Fees
    The Exchange believes its proposal equitably allocates its fees
among its market participants.
    The Exchange believes that the proposed Step Up Tier 2 is equitable
because the magnitude of the additional credit is not unreasonably high
relative to the other adding tier credits, which noted above range from
$0.0015 to $0.0022, in comparison to the credits paid by other
exchanges for orders that provide additional step up liquidity.\17\ The
Exchange believes the proposed rule change would improve market quality
for all market participants on the Exchange and, as a consequence,
attract more liquidity to the Exchange, thereby improving market-wide
quality and price discovery. The Exchange believes that requiring
member organizations to quote at least 15% of the NBBO in 300 or more
securities on a monthly basis in order to qualify for the proposed
credit would also encourage additional displayed liquidity on the
Exchange.
---------------------------------------------------------------------------

    \17\ See Cboe BZX Fee Schedule, which has adding credits ranging
from $0.0025 to $0.0032, at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------

    Since the proposed Step Up Tier 2 would be new, no member
organization currently qualifies for it. As noted, there are currently
no member organizations that could qualify for the proposed higher
credit, but without a view of member organization activity on other
exchanges and off-exchange venues, the Exchange has no way of knowing
whether this proposed rule change would result in any member
organization qualifying for the tier. The Exchange believes the
proposed higher credit is reasonable as it would provide an additional
incentive for member organizations to direct their order flow to the
Exchange and provide meaningful added levels of liquidity in order to
qualify for the higher credit, thereby contributing to depth and market
quality on the Exchange.
    The proposal neither targets nor will it have a disparate impact on
any particular category of market participant. All member organizations
would be eligible to qualify for the higher credit proposed in Step Up
Tier 2 if they increase their Adding ADV over their own baseline of
order flow. The Exchange believes that offering a higher step up credit
for providing liquidity if the step up requirements for Tape A
securities are met, will continue to attract order flow and liquidity
to the Exchange, thereby providing additional price improvement
opportunities on the Exchange and benefiting investors generally. As to
those market participants that do not presently qualify for the adding
liquidity credits, the proposal will not adversely impact their
existing pricing or their ability to qualify for other credits provided
by the Exchange.
The Proposal Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly
discriminatory. In the prevailing competitive environment, member
organizations are free to disfavor the Exchange's pricing if

they believe that alternatives offer them better value.
    The Exchange believes it is not unfairly discriminatory to provide
a higher per share step up credit, as the proposed credit would be
provided on an equal basis to all member organizations that add
liquidity by meeting the new proposed Step Up 2 Tier's requirements.
For the same reason, the Exchange believes it is not unfairly
discriminatory to provide an additional incremental credit to member
organizations that satisfy the Step Up Tier 2 requirements and add
liquidity in UTP securities. Further, the Exchange believes the
proposed Step Up Tier 2 credit would incentivize member organizations
that meet the current tiered requirements to send more orders to the
Exchange to qualify for higher credits. The Exchange also believes that
the proposed change is not unfairly discriminatory because it is
reasonably related to the value to the Exchange's market quality
associated with higher volume. Finally, the submission of orders to the
Exchange is optional for member organizations in that they could choose
whether to submit orders to the Exchange and, if they do, the extent of
its activity in this regard.
    Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
    For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.

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

    In accordance with Section 6(b)(8) of the Act,\18\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, as discussed above, the Exchange believes
that the proposed changes would encourage the submission of additional
liquidity to a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution opportunities
for member organizations. As a result, the Exchange believes that the
proposed change furthers the Commission's goal in adopting Regulation
NMS of fostering integrated competition among orders, which promotes
``more efficient pricing of individual stocks for all types of orders,
large and small.'' \19\
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b)(8).
    \19\ Regulation NMS, 70 FR at 37498-99.
---------------------------------------------------------------------------

    Intramarket Competition. The proposed changes are designed to
attract additional order flow to the Exchange. The Exchange believes
that the proposed changes would continue to incentivize market
participants to direct displayed order flow to the Exchange. Greater
liquidity benefits all market participants on the Exchange by providing
more trading opportunities and encourages member organizations to send
orders, thereby contributing to robust levels of liquidity, which
benefits all market participants on the Exchange. The proposed credits
would be available to all similarly-situated market participants, and,
as such, the proposed change would not impose a disparate burden on
competition among market participants on the Exchange.
    Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily choose to
send their orders to other exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. As noted,
the Exchange's market share of intraday trading (i.e., excluding
auctions) for the month of August 2019, in Tapes A, B and C securities
was only 9.3%.\20\ In such an environment, the Exchange must
continually adjust its fees and rebates to remain competitive with
other exchanges and with off-exchange venues. Because competitors are
free to modify their own fees and credits in response, and because
market participants may readily adjust their order routing practices,
the Exchange does not believe its proposed fee change can impose any
burden on intermarket competition.
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    \20\ See notes 8-9 supra.
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    The Exchange believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer similar order types and comparable
transaction pricing, by encouraging additional orders to be sent to the
Exchange for execution. The Exchange also believes that the proposed
change is designed to provide the public and investors with a Price
List that is clear and consistent, thereby reducing burdens on the
marketplace and facilitating investor protection.

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

    No written comments were solicited or received with respect to the
proposed rule change.

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

    The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \21\ of the Act and subparagraph (f)(2) of Rule
19b-4 \22\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \23\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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    \23\ 15 U.S.C. 78s(b)(2)(B).
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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_ADDRESS>Please include
File Number SR-NYSE-2019-53 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-NYSE-2019-53. 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-
NYSE-2019-53 and should be submitted on or before November 13, 2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-23052 Filed 10-22-19; 8:45 am]
 BILLING CODE 8011-01-P