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53228 Federal Register / Vol. 69, No. 168/Tuesday, August 31, 2004/Rules and Regulations affected by this designation, this analysis considers the relative number of small entities likely to be impacted in the area. Similarly, this analysis considers the relative cost of compliance on the revenues /profit margins of small entities in determining whether or not entities incur a "significant economic impact." Only small entities that are expected to be directly affected by the designation are considered in this portion of the analysis. This approach is consistent with several judicial opinions related to the scope of the RFA (Mid -Tex Electric Co- op .Inc. v. F.E.R.C., 773 F.2d 327 (D.C. Cir. 1985) and American Trucking Associations, Inc. v. U.S. E.P.A., 175 F.3d 1027, (D.C. Cir. 1999)). To determine if the rule would affect a substantial number of small entities, we considered the number of small entities affected within particular types of economic activities (e.g., grazing, oil and gas production, timber harvesting, etc.). We applied the "substantial number" test individually to each industry to determine if certification is appropriate. In estimating the numbers of small entities potentially affected, we also considered whether their activities have any Federal involvement; some kinds of activities are unlikely to have any Federal involvement and so will not be affected by critical habitat designation. Designation of critical habitat only affects activities conducted, funded, or permitted by Federal agencies; non - Federal activities are not affected by the designation. Federal agencies are already required to consult with us under section 7 of the Act on activities that they fund, permit, or implement that may affect the owl. The primary projects and activities by private entities that might be directly affected by the designation include the timber industry, livestock grazing industry, oil and gas industry, and rock quarry industry. Based on the final economic analysis we address the potential impacts to small businesses in each of these industries below. Timber Industry Small Business Impacts Limited data are available on the number of timber- related small businesses in the region or the average revenues of small businesses in this industry. Available data suggest that approximately 84 percent of timber - related businesses in the affected region are small businesses. The timber industry in the southwest has declined over the past 10 years due to a variety of factors, including owl related conservation activities. These factors include changes in the FS forest timber sales program at the national level, injunctions that halted timber sales in the region, and changes in regional FS forest management objectives. Since 1992, at least 15 mills have closed in the region, leaving approximately 15 sawmills currently operating in Arizona and New Mexico with an annual capacity of 61 MMBF. Timber harvest within FS Region 3 forests has declined over the past 15 years from an annual harvest of 148 MMBF per year, to the current level of 20 MMBF harvested in 2002. Lumber production in the region has seen similar declines. Current lumber production in the four corners region was 187 MMBF in 2002. Without owl- related conservation efforts, up to an additional 60 MMBF per year in timber harvest could have been available to the timber industry from FS Region 3 forests. This forecast high -end impact translates into approximately 78 MMBF in lost lumber production per year. As these are ongoing annual impacts related to past conservation actions, the timber industry has likely already adjusted to the reduced level of timber harvest from the national forests. Thus, future impacts to existing timber- related businesses in the region, all of whom are likely to be small businesses, are unlikely. These impacts would only occur if owl conservation efforts resulted in additional reductions in timber supply, above the forecast upper bound estimates. Given the current level of timber sales from FS Region 3 national forests, it is worth noting that sawmills operating in the region are likely dependent on either Tribal or private timber sources for their supply. Livestock Grazing Small Business Impacts Approximately 1,500 permittees grazed cattle on FS Region 3 forests during the past three years (2000 to 2002) and most of these operations are small businesses. Of these, approximately 850 permittees graze in the area proposed as critical habitat in FS Region 3 national forests. For purposes of this analysis, these are all assumed to be small entities. A number of these ranchers will be impacted by ongoing owl conservation activities, which, along with other factors including drought, result in limitations on the number of authorized animal unit months (AUMs) permitted on FS Region 3 lands. The expected reduction in AUMs is based on an examination of historical grazing levels and section 7 consultations. The number of AUMs grazing in proposed owl critical habitat is assumed to be proportional by acreage to the total number of AUMs grazed in a particular NF. The economic analysis finds that reductions in AUMs as a result of owl conservation measures, elk, and other threatened and endangered species may range from 10 percent to 50 percent for allotments that cross owl protected activity centers. In addition, future impacts are limited to those allotments that have yet to undergo NEPA analysis and associated section 7 consultation. Based on these assumptions, the estimated annual reduction is approximately 3,100 to 15,600 AUMs on FS Region 3 lands. Because information is not available on the specific permittees most likely to experience a reduction in authorized AUMs, the analysis uses two approaches to estimate impacts on small businesses related to reductions in AUMs. First, this analysis estimates the number of permittees that could possibly experience a complete reduction in their authorized AUMs. Second, the analysis estimates the impact on each permittee in the critical habitat designation, if the impacts were evenly distributed. Based on information on authorized AUMs and number of permittees on FS Region 3 lands, the typical permittee grazes approximately 1,070 AUMs. Given this, a forecast annual reduction in AUMs of 3,100 to 15,600 is equivalent to the total AUMs grazed by 3 to 15 permittees. Thus, if the total impacts were to affect the smallest number of permittees, less than two percent of grazing permittees in critical habitat would be affected. If the impacts of a reduction in AUMs were evenly distributed across all 850 permittees in critical habitat. This would result in an annual reduction of 4 to 19 AUMs per permittee. Given that permittees typically graze approximately 1,070 AUMs, this represents a reduction of less than two percent of AUMs per permittee. Oil and Gas Industry Small Business Impacts Impacts to oil and gas extraction from owl conservation activities have the potential to impact some small businesses operating in the New Mexico and Utah region. Based on historical consultation records, impacts on oil and gas operations in the past as a result of owl conservation efforts have been limited. However, given expected growth of oil and gas operations and exploration in the proposed critical habitat designation in Utah, there is some potential for small businesses to experience greater impacts in the future. Expected future impacts on the oil and gas industry include administrative costs, project modification costs, and - regional impacts resulting from delays to drilling activities.