May 25, 2001


Edward A. Brigham
Acting Deputy Director
Research and Special Programs Administration
U.S. Department of Transportation
Room PL-401
400 Seventh Street, S.W.
Washington, DC 20590-0001

     Re: Pipeline Safety: Pipeline Integrity Management in
     High Consequence Areas (Hazardous Liquid Operators with
     Less Than 500 Miles of Pipelines); 66 Fed. Reg. 15821;
     Docket No. RSPA-01-7408

Dear Mr. Brigham:

On March 21, 2001, the Research and Special Programs
Administration (RSPA) published a Notice of Proposed
Rulemaking (NPRM) on Pipeline Integrity Management in High
Consequence Areas.  The RSPA proposal would extend the
requirements for protection of populated areas, commercially
navigable waterways, and areas unusually sensitive to
environmental damage from hazardous liquid pipeline spills
to those regulated hazardous liquid pipeline operators who
own or operate less than 500 miles of pipeline.

The Office of the Chief Counsel for Advocacy of the U.S.
Small Business Administration (SBA) was created in 1976 to
represent the views and interests of small businesses in
Federal policy making activities.(1) The Chief Counsel
participates in rulemakings when she deems it necessary to
ensure proper representation of small business interests.
In addition to these responsibilities the Chief Counsel
monitors compliance with the Regulatory Flexibility Act
(RFA), and works with Federal agencies to ensure that their
rulemakings analyze and substantiate the impact that their
decisions will have on small businesses.

A review of RSPA's Regulatory Flexibility Act (RFA)
certification contained in the Pipeline Integrity Management
proposal has uncovered a deficiency that should be corrected
in the final rule.  Additional information is needed so that
the public may ascertain the validity of RSPA's
certification of no significant impact upon a substantial
number of small entities.  In order to comply with the RFA,
it is important that RSPA include the following information
in the final rule.

Need for the Regulation

In its proposal RSPA has not sufficiently clarified the need
for regulating those operators operating less than 500 miles
of pipeline.  The proposal states:

     This action is necessary because on December 01, 2000,
RSPA's Office of
     Pipeline Safety (OPS) issued a final rule to establish
     new requirements for the         protection of these
     areas. However, the published final rule applied only
     to hazardous liquid pipeline operators who own or
     operate 500 or more miles of pipeline.  After further
     review, it was determined that the same requirements
     should be extended to the remaining regulated hazardous
     liquid pipeline operators. (2)

RSPA further states that industry comments on the previous
regulation, covering larger liquid operations, urged that
the same requirements apply to all operators regardless of
the total mileage that they operate.  Unlike the present
proposal, the final rule covering the larger liquid
operators included a rationale for the rule, i.e. the need
to have integrity management programs in place for this
category of operators based upon inspections, accident
investigations and the National Transportation Safety
Board's analysis of several pipeline ruptures.

No such information was provided in this proposal
demonstrating that a significant problem exists for the
smaller liquid operators.  Have there been frequent
accidents with this smaller category of operators?  Do they
have a lower safety rating?  Have they failed to install
recommended safety changes within their operations?  There
is no indication that these pipeline operators are not
already performing adequate planning and management or
taking the appropriate steps to address any pipeline
problems in a timely manner.  RSPA stated that it "does not
know how many operators currently have leak detection
systems or how many will be installed or upgraded as a
result of this proposed rule."(3) The agency's statement
further acknowledges RSPA's lack of data on this segment of
the industry.  More information is needed to justify
extending the prior regulation to the smaller liquid
operators.  RSPA should provide the public with information
that there is a significant problem in sensitive areas and
that the small operators' current response is not adequate
to address any such problems.

Factual Basis for the Certification

The RFA generally requires Federal agencies to perform an
initial analysis of the small business impacts associated
with its proposal and identify flexibility alternatives.
The agency need not meet this requirement if the agency head
can certify that the rule will not have a significant
economic impact on a substantial number of small entities.
However, there must be a factual basis for the
certification.(4) RSPA proposes to certify the rule, but it
is not clear that there is a credible factual basis for a
certification.

In the previous regulation on hazardous liquid pipeline
operators who own or operate 500 or more miles of pipeline,
RSPA admitted the need to gather additional information on
smaller liquid operations prior to issuing this proposal.
The findings provided in the proposal were not sufficient as
a factual basis for an RFA certification statement.

     "Information that we collected revealed that many
     owners and operators of less  than 500 miles of
     pipelines are to a large extent, companies with
     sufficient capabilities and resources, and are able to
     handle the same requirements imposed on operators of
     500 miles or more of pipeline.  .50% of such pipelines
     are capable of accommodating [rule requirements]."(5)
          
RSPA is missing the point.  The issue is not whether some
small operators can "handle" the requirements, but rather
whether there is a disproportionate small-business impact.
If the small operators' pipelines tend not to be located in
sensitive areas, and more than 50% of the large operators
can meet the same requirements, there would not be a
credible factual basis for certification.  RSPA should
provide the public with an estimate of the percent of large
operators capable of meeting these requirements and the
information necessary to determine whether small operators
tend to be located in sensitive areas (e.g., pipeline
location, location of sensitive areas, affected
populations). Further, RSPA should examine the impact of
this proposal on small entities relative to their profits,
revenues, or some other factor which allows the agency to
make a cost comparison.  (See Cost discussion below).
Failure to provide the factual basis, including the basis
for its economic impact criterion, opens the rule to a valid
charge of non-compliance with the RFA.

Size Standard

In order to determine the impact upon small businesses, RSPA
must first determine how many small entities are affected by
the proposed rule. The proposal sates that 128 operators are
impacted by this proposal and many of them are "companies
with sufficient capabilities and resources."(6) How do these
128 operators relate to the U.S. Small Business
Administration's (SBA's) size standard for the hazardous
pipeline industry?(7) Are any of them considered to be small
businesses?  RSPA appears to indicate in its proposal that
the affected operators are considered to be large businesses
and won't be unduly burdened.  Without a comparison to SBA's
size standard, the public is unable to determine the
potential impact upon small business, if any, and whether
RSPA properly certified this rule under the RFA.

Cost Analysis

The costs provided in the proposed rule, and the supporting
economic analysis, includes only planning and management
costs.  Neither equipment nor maintenance costs have been
included in the cost estimates.  RSPA blames this lack of
inclusion on the inability to estimate the total cost of
installing the equipment.  "OPS does not know how many
operators will install them."(8) Additionally, RSPA explains
that cost estimates were not made because "OPS does not know
how many operators currently have leak detection systems or
how many will be installed or upgraded as a result of this
proposed rule.  OPS was therefore also unable to estimate
the total costs of the proposed lead detection
requirements."(9)

Clearly there are ways in which those costs can be
estimated.  By varying the number of potential operators
that will install the required equipment (EFRDs), RSPA can
provide the public with a range of cost scenarios.  What
will the cost be if 10% of the operators install EFRDs?
30%? 70%?

The same rationale would work for estimating the cost of the
proposal's leak detection requirements.  RSPA can first
assume a safe industry with many functional leak detection
systems in place, say 75%.  Then the agency can provide an
estimate with a mid-line safety threshold and finally
assuming a low end (10%?), with a large number of safety
systems needing to be installed or upgraded.  What would the
associated costs be with these estimates?  In this manner,
RSPA would be able to provide the public with varying cost
estimates and obtain feedback on which those estimates
contained the most realistic cost alternative.

Conclusion

The errors in the certification of the proposed rule should
be addressed by RSPA in the preamble to the final rule and
additional clarification statements added to the cost
analysis and RFA sections as noted above.

If you require additional information or any other
assistance, feel free to contact Claudia Rodgers at 202-205-
6533.

Sincerely,

Susan M. Walthall
Chief Counsel for Advocacy

Claudia Rayford Rodgers
Asst. Chief Counsel for Advocacy

ENDNOTES

1.  Regulatory Flexibility Act, 5 U.S.C.  601, as amended
by the Small Business Regulatory Flexibility Act, Pub. L.
No. 104-121, 110 Stat. 866 (1996).
2.  66 Fed. Reg. 15821.
3.  Id.
4.  Id. 605(b).
5.  66 Fed. Reg 15821.
6.  Id. at 15824.
7.  See 13 CFR 121.201.
8.  66 Fed. Reg. at 15823.
9.  Id.