February 7, 2007
BY ELECTRONIC MAIL
Mr. Dennis Deziel, Chief Program Analyst
Chemical Security Regulatory Task Force
IP/CNPPD, Mail Stop 8610
Department of Homeland Security
Washington, DC 20528-8610
Electronic Address: http://www.regulations.gov (RIN 1601-AA41; Docket No. DHS-
2006-0073)
Re:  Proposed Chemical Facility Anti-Terrorism Standards Rule
Dear Mr. Deziel:
The U.S. Small Business Administration's (SBA) Office of Advocacy (Advocacy)
submits the following comments on the Department of Homeland Securitys (DHS)
Proposed Chemical Facility Anti-Terrorism Standards Rule.(1)  The draft interim final
rule would implement Section 550 of the Homeland Security Appropriations Act of 2007,
which requires DHS to promulgate interim final regulations for the security of certain
chemical facilities in the United States within six months of its passage.(2)  DHS has
worked closely with private sector entities in the chemical industry as well as state and
local government entities and other interested stakeholders and has published a draft rule
that utilizes risk assessment, performance standards, and flexibility in allowing chemical
facilities to tailor their security plans to their individual circumstances.(3)  It should be
noted that many chemical facilities have already developed and implemented voluntary
security programs.(4)
Office of Advocacy
Advocacy was established pursuant to Pub. L. 94-305 to represent the views of small
entities before federal agencies and Congress.  Advocacy is an independent office within
SBA, so the views expressed by Advocacy do not necessarily reflect the views of the
SBA or the Administration.  The Regulatory Flexibility Act (RFA),(5) as amended by the
Small Business Regulatory Enforcement Fairness Act (SBREFA),(6) gives small entities
a voice in the rulemaking process.  For all rules that are expected to have a significant
economic impact on a substantial number of small entities, federal agencies are required
by the RFA to assess the impact of the proposed rule on small business and to consider
less burdensome alternatives.(7)  Moreover, on August 13, 2002, President Bush signed
Executive Order 13272,(8) which requires federal agencies to notify Advocacy of any
proposed rules that are expected to have a significant economic impact on a substantial
number of small entities and to give every appropriate consideration to any comments on
a proposed or final rule submitted by Advocacy.  Further, the agency must include, in any
explanation or discussion accompanying publication in the Federal Register of a final
rule, the agency's response to any written comments submitted by Advocacy on the
proposed rule.
Background
Under DHS draft interim final rule, chemical facilities meeting a certain risk profile
would be required to complete an initial risk assessment screening through a secure DHS
website.(9)  DHS would use this information to determine whether the facility presents a
high security risk.  If it does, the facility would be required to prepare and submit a
Vulnerability Assessment and Site Security Plan to DHS.  DHS would evaluate these
submissions for compliance with certain risk-based performance standards and conduct
an inspection and audit of the facility.  DHS would work with the facility to ensure the
security plans are approved, and would then use these documents as the criteria against
which compliance would be measured.  In other words, facilities would be given
flexibility to develop plans that are tailored to their individual circumstances, and then
would be held accountable by DHS to meet those standards.(10)
Discussion
Federal regulations must generally undergo certain regulatory analyses and review before
they are finalized.(11)  As indicated above, one of these analyses is an Initial Regulatory
Flexibility Analysis (IRFA) under the Regulatory Flexibility Act (RFA).  An IRFA is
required whenever a federal rule is expected to have a significant economic impact on a
substantial number of small entities.(12)  In this instance, DHS did not assess the impact
of this proposed rule on small entities or prepare an IRFA because Congress directed it to
issue interim final regulations within six months.  While Congress did not specifically
instruct the agency to bypass the proposed rule stage, the short timeframe and interim
final language arguably gave the agency good cause to bypass the traditional notice and
comment rulemaking process and the RFA.(13)  However, there is no doubt that
numerous small businesses will be required to comply with this interim final rule and that
the costs to them will be significant.  For instance, if a small business is required to
implement security controls (e.g., erect security fences, install video cameras, hire
security personnel, etc.) or to change its current procedures (e.g., revise inventory
practices, substitute materials, etc.), it could face substantial compliance costs.  To its
credit, DHS has requested public comment on the economic impact of the draft rule on
small entities.(14)
However, following established agency practices, DHS should prepare an IRFA upon
issuance of its interim final rule and publish it for public comment along with a request
for post-promulgation comment on the final interim rule.(15)  While time constraints may
have justified the agency not preparing an IRFA prior to publication of the draft rule,
there is no reason not to prepare and publish one immediately after issuance of the
interim final rule.  Further, DHS states that once its interim final rule is adopted, it may
decide to revise it at a later date.(16)  If it does, DHS should likewise comply with the
Administrative Procedure Act(17) and RFA at that time.(18)
The RFA process is an extremely valuable tool for federal agencies to use when assessing
the impact of its regulations on small businesses and other small entities.  The analysis
includes a description of why the action is being considered, who will be affected, what
will be required, and what feasible alternatives the agency considered that may be less
costly and burdensome.(19)  The process is intended to increase the likelihood that
regulations will be sound, workable, and cost-effective.
Small businesses bear a disproportionate share of the regulatory burden.  A 2005
Advocacy-funded study by W. Mark Crain entitled, The Impact of Regulatory Costs on
Small Firms(20) found that of the nearly $1.1 trillion annual regulatory burden, small
businesses with less than 20 employees faced an annual regulatory cost of $7,647 per
employee, nearly forty-five percent higher than regulatory costs facing large firms (with
500 or more employees).(21)  Given the potential cost and impact of this chemical
facility security rule on small businesses, the RFA should help the agency develop a more
flexible and cost-effective regulation.  In fact, carefully considering the impact of federal
regulations on small business, obtaining their input, and exploring feasible alternatives
are likely to result in better regulations, higher compliance rates, and enhanced security.
Conclusion
Advocacy commends DHS for issuing its draft rule on such a tight schedule and for
providing flexibility to the regulated community.  The recognition that one-size-fits-all
regulations in this area would be difficult to implement, and the reliance on risk
assessment, performance standards, and flexibility, appears to be a sound approach.  To
ease implementation of the new rule, DHS should consider issuing small business
compliance guides, conducting small business outreach, and developing flexible
enforcement strategies to assist small businesses.  Please feel free to contact me or Bruce
Lundegren at (202) 205-6144 (or bruce.lundegren@sba.gov) if you have any questions or
require additional information.
Sincerely,
Thomas M. Sullivan
Chief Counsel for Advocacy
Bruce E. Lundegren
Assistant Chief Counsel for Advocacy
cc:  Steven D. Aitken, Acting Administrator
      Office of Information and Regulatory Affairs
      Office of Management and Budget
ENDNOTES
1.  71 Fed. Reg. 78276 (December 28, 2006).
2.  Id.
3.  Id.
4.  Id.
5.  5 U.S.C.  601 et seq.
6.  Pub. L. 104-121, Title II, 110 Stat. 857 (1996) (codified in various sections of 5 U.S.C.  601 et seq.).
7.  5 U.S.C.  603.
8.  See, Executive Order 13272, Proper Consideration of Small Entities in Agency Rulemaking (67 Fed.
Reg. 53461) (August 16, 2002).
9.  71 Fed. Reg. 78276.
10. Id.
11. See, Executive Order 12866, Regulatory Planning and Review, available at
http://www.whitehouse.gov/omb/inforeg/eo12866/eo12866_amended_01-2007.pdf.
12. 5 U.S.C  603(a).
13. DHS states that when an agency publishes a rulemaking without prior notice and opportunity for
comment, the Regulatory Flexibility Act requirements do not apply. (71 Fed. Reg. 78292).  However, this
language seems to mischaracterize the RFA, which provides: Whenever an agency is required by Section
553 of this title, or any other law, to publish general notice of proposed rulemaking for any proposed
rulemaking  the agency shall publish and make available for public comment an initial regulatory
flexibility analysis. (5 U.S.C 603 (a)).  Hence, the RFA is triggered by the legal requirements for notice
and comment under the Administrative Procedure Act, not by whether or not a given rule is actually
offered for notice and public comment.
14. 71 Fed. Reg. 78292.
15. See, Jeffrey S. Lubbers, A Guide to Federal Agency Rulemaking (4th Ed. 2006), p. 114 - 115. ( in
many cases, agencies issuing rules without notice and comment following a good cause finding have
referred to the rules as interim rules and then modified the rules, as appropriate, following post-
promulgation comment.  This practice comports with a recommendation of the Administrative Conference
adopted in 1995.  Congress has also expressly authorized this procedure in specific programs from time to
time.) (Footnotes omitted).
16. 71 Fed. Reg. 78281.
17. 5 U.S.C.  553 et seq.
18. The final interim rule is scheduled under the authorizing legislation to sunset in three years, presumably
unless and until further authorizing legislation is enacted. (71 Fed. Reg. 78281).
19. 5 U.S.C.  603.
20. The Impact of Regulatory Costs on Small Firms (September 2005) is available at
http://www.sba.gov/advo/research/rs264tot.pdf.
21. Id. at page v.
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