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Approval and Promulgation of Implementation Plans; California State Implementation Plan Revision, South Coast Air Quality Management District

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AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Final rule.

SUMMARY:

EPA is finalizing disapproval of Rule 1623 of the South Coast Air Quality Management District (SCAQMD) which has been submitted as a revision to the State Implementation Plan (SIP). EPA proposed disapproval of this revision in the Federal Register on January 18, 2000. Rule 1623, Credits for Lawn and Garden Equipment, provides a mechanism for issuing mobile source emission reduction credits (MSERCs) to entities who sell or replace old engine-powdered lawn and garden equipment with new low- or zero-emission lawn and garden equipment. EPA is finalizing disapproval under CAA provisions regarding EPA action on SIP submittals and general rulemaking authority because this revision is not consistent with applicable CAA requirements.

EFFECTIVE DATE:

This action is effective on March 30, 2000.

ADDRESSES:

Copies of the submitted rule and EPA's evaluation report on the rule are available for public inspection at EPA's Region IX office during normal business hours. Copies of the submitted rules are also available for inspection at the following locations:

California Air Resources Board, 2020 L Street, Sacramento, CA 95814

South Coast Air Quality Management District, 21865 E. Copley Drive, Diamond Bar, California 91765-4182

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FOR FURTHER INFORMATION CONTACT:

Roxanne Johnson, Air Planning Office, AIR-2, Air Division, U.S. Environmental Protection Agency, Region IX, 75 Hawthorne Street, San Francisco, CA 94105-3901, Telephone: (415) 744-1225.

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SUPPLEMENTARY INFORMATION:

I. Applicability

EPA is disapproving SCAQMD Rule 1623—Credits for Clean Lawn and Garden Equipment. SCAQMD adopted Rule 1623 on May 10, 1996, and the California Air Resources Board (CARB) submitted the rule to EPA on August 28, 1996.

II. Background

Rule 1623 claims to provide opportunities for stationary sources to generate oxides of nitrogen (NOx), volatile organic compounds (VOCs), carbon monoxide (CO), and particulate (PM) mobile source emission reduction credits (MSERCs). Any entity interested in participating in Rule 1623 could implement one of three strategies to generate credits: (1) before January 1, 1999, permanently scrap and replace existing lawn and garden equipment with equipment which meets the 1995 California Emission Standards for Utility and Lawn and Garden Engines; (2) permanently scrap and replace existing gasoline-powered lawn and garden equipment with new low- or zero-emission equipment; or (3) after May 10, 1996 and prior to January 1, 1999, direct sale to an end user of new low-emission lawn and garden equipment, or on or after January 1, 1991, direct sale to an end user of new zero-emission equipment.

The Act broadly encourages, and under certain circumstances Title I of the Act mandates, States to develop and Start Printed Page 10714facilitate market-based approaches for achieving the environmental goals of the Act for attainment and maintenance of the National Ambient Air Quality Standards (NAAQS), and to meet associated emission reduction milestones. EPA has developed comprehensive guidance and rules (as required by the Act) for States and individual sources to follow in designing and adopting such programs for inclusion in SIPs. The Economic Incentive Program (EIP) Rules (40 CFR part 51, subpart U) provide a broad framework for the development and use of a wide variety of incentive strategies for stationary, area, and/or mobile sources. One such approach is the generation and trading of emission reduction credits, which historically have been allowed under guidance provided in the 1986 Emission Trading Policy Statement (see 51 FR 43631, December 4, 1986). In certain areas where emission control costs for stationary sources may be high relative to mobile source control costs, creating EIPs which allow for the trading of emission reduction credits from mobile sources to stationary sources can be beneficial.

Rule 1623 is a voluntary program, and the exact emission reductions are unknown. EPA can only approve Rule 1623 in the SIP, if the reductions are surplus and are quantifiable. In our January 18, 2000 (65 FR 2557) we proposed disapproval for Rule 1623 because the rule does not meet federal requirements including the requirement that emission reductions be real, quantifiable, enforceable, and surplus.

III. Response to Comments

EPA received comments from the South Coast Air Quality Management District (“District”) and comments from Communities for a Better Environment. The following comments were submitted by the District. The District objects to EPA's proposed disapproval and requests that it be revised to a proposed conditional approval.

District Comment #1: This comment is entitled “Are Emission Reductions Surplus?” The District states that “EPA is insisting on administrative requirements so burdensome they would destroy the value of the rule.” The District further states that it is “wholly impractical to source-test each piece of law and garden equipment” and that the District properly relied upon emissions data developed by the California Air Resources Board (“CARB”). Finally, the District claims that, contrary EPA's analysis, the rule provides for sufficient “procedures to ensure that engines being scrapped or replaced are operable.”

Response to District Comment #1: The District misunderstands the Agency's point regarding quantification, completely ignores the requirement that claimed emission reductions must be demonstrated to be surplus, and is mistaken in asserting that procedures to ensure that engines being scrapped or replaced are operable can be developed in scrappage plans rather than being set forth in the rule. EPA did not propose to disapprove Rule 1623 for its failure to require that each piece of lawn and garden equipment be source-tested. The problem with Rule 1623 is that the emissions rates are merely set forth without any substantiation, in the technical support document or anywhere in the supporting materials for Rule 1623, showing that these figures are accurate. EPA might be able to accept emission rates in this form if there was sufficient data showing that the rates represented an accurate average of emissions from such sources and that the deviation from the average was relatively small and thus acceptable for quantification purposes. Lacking such data and justification, EPA cannot accept unsubstantiated emission rates as the basis for emission quantification.

A credit generating rule cannot be approved unless it is shown that the credits which would be generated are “surplus,” i.e., not required by or assumed in the air basin's current EPA-approved implementation plan, inventory, or attainment demonstration. This is especially important in a rule, like Rule 1623, which claims to generate surplus credits through the accelerated retirement of equipment and its early replacement with cleaner equipment. Older and worn out equipment is constantly being replaced. This replacement cycle is assumed, and indeed relied upon, in virtually all air quality plans. If credits were given for this normal turnover, those credits would be invalid and would damage air quality and the planning process designed to protect it. Therefore, to be acceptable a rule which would generate credits from the accelerated retirement and replacement of equipment must demonstrate that implementation of the rule would actually reduce emissions below the level assumed in the SIP. In addition, the rule would have to be designed to grant credits only to the accelerated retirement and replacement, and not to the normal equipment turnover which would happen in any case.

Finally, elements of a rule which are critical to its integrity must be contained in the rule. Rule 1623 does not contain specific provisions to ensure that engines being scrapped or replaced pursuant to the rule are operable and have useful remaining life. If the engines being replaced are not operable, or if they do not have the remaining life assumed by the rule, inappropriate credits will be generated. Provisions to prevent this invalid credit need to be in Rule 1623, and may not be created afterward in scrappage project plans as the District suggests. This would delegate too much discretion to the District in implementation of the rule and EPA would be left with insufficient information to judge the validity of credits and, through oversight, ensure the effectiveness of the rule.

The problems with Rule 1623 described above are not new to the District. These problems, in varying degrees and forms, were experienced by the District in its implementation of a companion to Rule 1623—Rule 1610. Rule 1610 implements a car scrappage credit generating program which, according to the District's own analysis, has suffered from defects relating to emissions quantification, surplus, and operable vehicles.

District Comment #2: This comment objects to EPA's statement that penalty provisions of Rule 1623 “are not clearly defined” and thus are not practically enforceable. The District believes EPA is insisting that the underlying legal authority, California's Health & Safety Code, be repeated in the rule.

Response to District Comment #2: EPA is not insisting that the penalty authority in California's Health & Safety Code be repeated in Rule 1623. However, we do have at least two major problems with the enforcement language set forth in section (j) of Rule 1623.

Section (j) does not define the duration of a violation and this is critical in creating sufficient deterrent in enforcement. For example, providing inaccurate data could be a single violation, based on the date of submittal, and thus penalty authority could be limited to a single day. The provisions of Rule 1623 could be interpreted in this manner. In contrast, violations could be defined as continuing from the date of submittal until such time that the inaccuracies were corrected. To create clear and sufficient deterrent, Rule 1623 must define violations as continuing until they are corrected.

Section (j) incorrectly limits injunctive relief to denying or voiding credits where a generator has violated the requirements of Rule 1623. If, in violating the requirements of Rule 1623, a person has generated invalid credits Start Printed Page 10715which have been used by another source, the generator should be subject to injunctive relief which would require replacement of those invalid credits.

District Comment #3: In this comment, the District states that it is unable to respond to EPA's belief that a survey should be implemented with Rule 1623. The District suggests that EPA specify the information needed so the District can determine if a survey is needed.

Response to District Comment #3: In itself, the failure to have a survey would probably not prompt EPA to disapprove Rule 1623. However, EPA believes that a survey is needed to evaluate the effectiveness of Rule 1623, if it is eventually implemented. The District already has such a survey for Rule 1610, discussed earlier, and the same type of information would be important to evaluate Rule 1623.

District Comment #4: In this comment, the District states that destruction of all engine parts should not be necessary, given the small value of the engines involved.

Response to District Comment #4: The destruction of all engine parts should not be a real burden, since that would be the normal course unless those parts were made available for scavenging or as rebuildable “cores.” Under the guidelines established by the CARB for car scrappage, the entire vehicle must be scrapped to avoid parts being returned to the market to extend the life of the remaining older cars. The same principle should applies to all programs which would generate credits from the accelerated retirement of equipment.

District Comment #5: In this comment, the District questions whether it is necessary to provide definitions for eight terms (“useful life,” “surplus,” “certified engine,” “project plan,” “baseline emission standards,” “load factor,” “equipment operator,” and “permanent replacement”) which EPA believed should be further defined and clarified in Rule 1623.

Response to District Comment #5: With the exception of “surplus,” EPA would probably not have proposed to disapprove Rule 1623 for lack of further definition and clarification of these terms. This list of terms was intended to be a suggestion to help clarify the rule.

However, as set forth in the response to comment #1, above, EPA believes that the District has failed to demonstrate that emission reductions claimed pursuant to Rule 1623 would be, in fact, suprlus. For Rule 1623, the District would have to demonstrate that implementation of the rule would result in an accelerated rate of equipment retirement. In addition, the rule would have to be designed to grant credits only to the accelerated retirement and replacement, and not to the normal equipment turnover which would happen in any case.

District Comment #6a: “EPA's objection to a section allowing credits under certain circumstances before January 1, 1999 (p. 3) is meritless. The fact the date has passed is no reason to reject the remainder of the rule.”

Response to District Comment #6a: EPA agrees with this comment. We misstated our objection, which should have been tied to Option 2 of the rule and the delay in CARB's promulgation of its Tier II Lawn & Garden rule.

District Comment #6b: In this comment, the District dismisses EPA's concern that a rule which CARB intends to develop for the small off-road engines (“SORE”) category would conflict with Rule 1623 and result in double-counting. The District states that its rule cannot predict and address all possible future rules. The District also suggests that CARB could address double-counting in its rule making.

Response to District Comment #6b: Rule 1623 can and should anticipate the SORE rule. The SORE rule has been in development for some time and the District has had ample opportunity to avoid any issues of double-counting in crafting the provisions of Rule 1623. To avoid the possibility of double-counting due to the SORE rule, or any other intervening rule, Rule 1623 could provide for a yearly check on the surplus status of credits from ongoing scrappage projects. If an activity from a credit generating project becomes required by another rule, the stream of credits from that activity could be terminated on the basis that the project no longer meets the surplus requirement.

District Comment #6c: “EPA is concerned about the definitions of specialty vehicles and golf carts. Since these are not included in the rule at present, there is no need for concern about them.”

Response to District Comment #6c: Since Rule 1623 must be significantly revised to be approvable, the District can remove references to specialty vehicles and golf carts.

District Comment #6d: In this comment, the District agrees that delay in implementation of CARB's Tier II Lawn & Garden emission standards needs to be addressed. The District suggests that this could be done through adjusting the credit tables in Rule 1623 and this should be made a condition in a reproposal to conditionally approve Rule 1623.

Response to District Comment #6d: CARB's Tier II Lawn & Garden rule is critical to the implementation of Rule 1623. The emissions rates set forth in Tables 2 and 3 of Rule 1623 as “Meeting 1999 Standards” rely on Tier II. In addition, the engine certification process in Tier II is necessary to ensure that engines purchased actually meet emissions rates set forth in Rule 1623. Without this basis, the quantification procedures set forth in Rule 1623 cannot be legitimately used. It is not adequate, as the District suggests, to cure this defect through a conditional approval.

District Comment #6e: In this comment, the District states that it does not understand EPA's objection to the section (h) of Rule 1623 which allows the use of credits generated pursuant to the rule in a number of other setting, e.g., as RECLAIM trading credits, alternate compliance for Regulation XI rules, etc. The District appears to believe that EPA wants projects pursued under Rule 1623 to be individually approved into the implementation plan.

Response to District Comment #6e: EPA has no desire to have projects pursued under Rule 1623 to be individually approved into the implementation plan. EPA's objection to section h stems from our experience with credits generated via Rule 1610 being used for alternative compliance for Regulation XI requirements. The main problem is that Regulation XI rules do not have protocols for calculating mass emissions. This has allowed sources and the District to create their own emissions quantification protocols. The results have been extremely poor. In two instances, where EPA is currently taking enforcement actions, the available evidence indicates that the sources, with the District's approval, used quantification protocols which undercounted emissions subject to Regulation XI requirements by as much as two orders of magnitude. EPA has been able to address the situation through enforcement only because Rule 1610 has not been approved into the implementation plan. Rule 1623 shares the same flaw as Rule 1610 in allowing quantification protocols to be created ad-hoc. Such provisions are not practically enforceable, lack integrity, and would delegate unacceptable discretion to the District.

District Comment #6f: ``EPA states one reason for disapproval as `evidence that the program has not been implemented and enforced in a way that results in the achievement of cleaner air.' (p. 7) This objection makes no sense. The program has not been implemented at all, so EPA Start Printed Page 10716cannot have any evidence of improper implementation.”

Response to District Comment #6f: The District is correct in noting that EPA's objection, as written, makes no sense. It was the result of a drafting error. The intent was to make reference, as was done in response to comment #6e, above, to failures in the implementation and enforcement of Rule 1610. Since Rule 1623 shares many of the characteristics of Rule 1610, our intent was to point out that proceeding with Rule 1623 would result in the same types of problems.

District Comment entitled “Conclusion”: In the conclusion to its comments, the District claims that it has addressed “most of EPA's objections” and suggests that EPA revise its proposed disapproval to a proposed conditional approval.

Response to District Comment entitled “Conclusion”: In its current form and without much greater substantiation of critical points, EPA believes that Rule 1623 is fatally flawed. The issues concerning emissions quantification, surplus, enforceability, potential double-counting, and unacceptable delegation of discretion to the District prevent EPA from approving Rule 1623 into the implementation plan for the District.

Communities for a Better Environment Comment: CBE submitted comments in support of EPA disapproval of Rule 1623. Two specific reasons included: (1) mobile to stationary source trading, especially in highly toxic compounds, is a concept that impedes the goal of environmental justice; and (2) Rule 1623 does not ensure that the reductions it credits are quantifiable, enforceable and surplus. CBE also urged that EPA should completely disallow trading of toxic pollutants, should disallow cross-pollutant trading, especially trading of carbon monoxide and particulate matter. Finally, CBE commented that local air district rules must not frustrate federal law; scrapping under Rule 1623 does not create “quantifiable” and “surplus” reductions; and allowing credits to sellers of low-emitting equipment is nonsensical.

Response to CBE Comment: EPA's final action is consistent with CBE's comments.

IV. EPA Action

EPA is finalizing disapproval of Rule 1623 because it does not meet applicable CAA requirements. The effect of this action is that the federally enforceable California SIP remains unchanged. Because the CAA does not require this rule and because today's action maintains the stringency of the current SIP, EPA's disapproval of the submitted rule does not trigger sanctions or Federal Implementation Plan (FIP) clocks under section 179 of the CAA.

As Rule 1623 is a substitute for existing requirements, EPA does not believe that disapproval of the program will have any effect on air quality in the South Coast Air Basin. Regulated entities which may have been using Rule 1623 to comply with control technology requirements have the opportunity to apply control or otherwise comply directly (in the case of ridesharing requirements) in lieu of purchasing credits generated under Rule 1623.

Nothing in this action should be construed as permitting or allowing or establishing a precedent for any future request for revision to any state implementation plan. Each request for revision to the state implementation plan shall be considered separately in light of specific technical, economic, and environmental factors and in relation to relevant statutory and regulatory requirements.

V. Administrative Requirements

A. Executive Order 12866

The Office of Management and Budget (OMB) has exempted this regulatory action from Executive Order 12866, Regulatory Planning and Review.

B. Executive Order 13132

Federalism (64 FR 43255, August 10, 1999) revokes and replaces Executive Order 12612, Federalism, and Executive Order 12875, Enhancing the Intergovernmental Partnership. Executive Order 13132 requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in Executive Order 13132 to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” Under Executive Order 13132, EPA may not issue a regulation that has federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, or EPA consults with State and local officials early in the process of developing the proposed regulation. EPA also may not issue a regulation that has federalism implications and that preempts State law unless the Agency consults with State and local officials early in the process of developing the proposed regulation.

This rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. Thus, the requirements of section 6 of Executive Order 13132 do not apply to this rule.

C. Executive Order 13045

Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997), applies to any rule that: (1) Is determined to be “economically significant” as defined under Executive Order 12866, and (2) concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency. This rule is not subject to Executive Order 13045 because it does not involve decisions intended to mitigate environmental health or safety risks.

D. Executive Order 13084

Under Executive Order 13084, Consultation and Coordination with Indian Tribal Governments, EPA may not issue a regulation that is not required by statute, that significantly or uniquely affects the communities of Indian tribal governments, and that imposes substantial direct compliance costs on those communities, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by the tribal governments, or EPA consults with those governments. If EPA complies by consulting, Executive Order 13084 requires EPA to provide to the Office of Management and Budget, in a separately identified section of the preamble to the rule, a description of the extent of EPA's prior consultation with representatives of affected tribal governments, a summary of the nature of their concerns, and a statement supporting the need to issue the regulation. In addition, Start Printed Page 10717Executive Order 13084 requires EPA to develop an effective process permitting elected officials and other representatives of Indian tribal governments “to provide meaningful and timely input in the development of regulatory policies on matters that significantly or uniquely affect their communities.” Today's rule does not significantly or uniquely affect the communities of Indian tribal governments. Accordingly, the requirements of section 3(b) of Executive Order 13084 do not apply to this rule.

E. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small not-for-profit enterprises, and small governmental jurisdictions. This rule will not have a significant impact on a substantial number of small entities because disapprovals of SIP revisions under section 110 and subchapter I, part D of the Clean Air Act do not affect any existing requirements applicable to small entities. Any existing Federal requirements will remain in place. Federal disapproval of the State SIP submittal will not affect State-enforceability. Moreover, EPA's disapproval of the submittal would not impose any new Federal requirements. Therefore, I certify that this action will not have a significant economic impact on a substantial number of small entities.

F. Unfunded Mandates

Under section 202 of the Unfunded Mandates Reform Act of 1995 (“Unfunded Mandates Act”), signed into law on March 22, 1995, EPA must prepare a budgetary impact statement to accompany any proposed or final rule that includes a Federal mandate that may result in estimated annual costs to State, local, or tribal governments in the aggregate; or to private sector, of $100 million or more. Under section 205, EPA must select the most cost-effective and least burdensome alternative that achieves the objectives of the rule and is consistent with statutory requirements. Section 203 requires EPA to establish a plan for informing and advising any small governments that may be significantly or uniquely impacted by the rule.

EPA has determined that this disapproval action does not include a Federal mandate that may result in estimated annual costs of $100 million or more to either State, local, or tribal governments in the aggregate, or to the private sector. The disapproval will not change existing requirements and imposes no new requirements. Accordingly, no additional costs to State, local, or tribal governments, or to the private sector, result from this action.

G. Submission to Congress and the Comptroller General

The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. A major rule cannot take effect until 60 days after it is published in the Federal Register. This rule is not a “major” rule as defined by 5 U.S.C. 804(2).

H. National Technology Transfer and Advancement Act

Section 12 of the National Technology Transfer and Advancement Act (NTTAA) of 1995 requires Federal agencies to evaluate existing technical standards when developing a new regulation. To comply with NTTAA, EPA must consider and use “voluntary consensus standards” (VCS) if available and applicable when developing programs and policies unless doing so would be inconsistent with applicable law or otherwise impractical.

The EPA believes that VCS are inapplicable to this action. Today's action does not require the public to perform activities conducive to the use of VCS.

I. Petitions for Judicial Review

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by May 1, 2000. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

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List of Subjects in 40 CFR Part 52

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Dated: February 15, 2000.

Felicia Marcus,

Regional Administrator, Region IX.

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Part 52, chapter I, title 40 of the Code of Federal Regulations is amended as follows:

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PART 52—[AMENDED]

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1. The authority citation for part 52 continues to read as follows:

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

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Subpart F—California

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2. Part 52 is amended by adding § 52.242 to read as follows:

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Disapproved rules and regulations.

(a) The following Air Pollution Control District rules are disapproved because they do not meet the requirements of section 110 of the Clean Air Act.

(1) South Coast Air Quality Management District.

(i) Rule 1623, Credits for Lawn and Garden Equipment, submitted on August 28, 1996 and adopted on May 10, 1996.

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[FR Doc. 00-4785 Filed 2-28-00; 8:45 am]

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