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Practice Li mited to Fe de ral Law and Reg u lati o n. www.chemicalsecurity.com May 12, 2009

The Honorable Ivan K. Fong Via Overnight Delivery
General Counsel U.S. Department of Homeland Security Washington, D.C. 20528

Re : Petition for a Declaratory Order Pursuant to 5 U.S.C. § 554(e)

Dear Mr. Fong:

Pursuant to 5 U.S.C. § 554(e), the International Liquid Terminals Association, on behalf of its affected members, hereby petitions the D epart m entof Hom eland S ecurity to declare ga so lin e, as a mixture with a National Fire Protection Association flammability hazard rating of 3, exempt from the Chemical Facility Anti-Terrorism Standards codified at 6 CFR Part 27.

The petition and supporting exhibits are enclosed.

Respectfully submitted,

Steven E. Roberts Roberts Law Group, PLLC
Practice Limited to Federal Law 700 Louisiana Street, Suite 2300 Houston, Texas 77002 Telephone: (713) 572-3600 Facsimile: (713) 572-3900

Attorney for Petitioner

cc: The Honorable Janet Napolitano James Snyder, Deputy Assistant Secretary for Infrastructure Protection Susan Armstrong, Director, Infrastructure Security Compliance Division Dennis Deziel, Deputy Director, Infrastructure Security Compliance Division

## PETITION OF THE

INTERNATIONAL LIQUID
TERMINALS ASSOCIATION

FOR A DECLARATORY ORDER

PURSUANT TO 5 U.S.C. § 554(e)

_______________________________

Steven E. Roberts Roberts Law Group, PLLC

Practice Limited to Federal Law 700 Louisiana Street, Suite 2300 Houston, Texas 77002 Telephone: (713) 572-3600 Facsimile: (713) 572-3900

Attorney for Petitioner

May 12, 20092 PETITION OF THE INTERNATIONAL LIQUID TERMINALS ASSOCIATION

FOR A DECLARATORY ORDER PURSUANT TO 5 U.S.C. § 554(e)

TABLE OF CONTENTS

PART I. INTRODUCTION ........................................................................................................ 3

PART II. STATEMENT OF FACTS .......................................................................................... 5

A. The CFATS Rulemaking Process ...................................................................................... 5

B. CFATS and the Treatment of Gasoline ............................................................................. 6

C. Top-Screen Submissions ..................................................................................................... 7

PART III. ARGUMENT ........................................................................................................... .. 8

A. Substantive Deficiencies ..................................................................................................... 8

1. There is no Rational Basis to Conclude that Gasoline Presents a Risk of Forming an Explosive Vapor Cloud in a Security Context ............................................................... 8

2. By Including Gasoline Stored in Abovegr ound Liquid Terminals, DHS Arbitrarily and Capriciously Deviated From EPA’s RMP Rules ......................................................... 12

3. DHS Regulation of Gasoline Stored in Aboveground Liquid Terminals is Arbitrary and Capricious .............................................................................................................. 1 4

B. Procedural Deficiencies ..................................................................................................... 16

1. The Rulemaking Violated the Logical Outgrowth Test ............................................... 16

2. DHS “Guidance” Has Not Been Subject to Notice-and-Comment ............................. 20

3. DHS Failed to Consider Executive Order 13211 ......................................................... 24

PART IV. CONCLUSION ........................................................................................................ 2 5

PART V. EXHIBITS ......................................................................................26

_______________________________3 PART I. INTRODUCTION

Pursuant to 5 U.S.C. § 554(e), the Internatio nal Liquid Terminals As sociation, (“ILTA”) on behalf of its affected members, hereby petitions the Department of Homeland Security (“DHS”) to declare gasoline, as a mixture with a Na tional Fire Protection Association (“NFPA”) flammability hazard rating of 3, exempt from th e Chemical Facility Anti-Terrorism Standards (“CFATS”) codified at 6 CFR Part 27.

ILTA is an international trade association that represents eighty-five commercial operators of bulk liquid terminals, aboveground storage tank facilities, and pi peline companies located in forty-three countries. In addi tion, ILTA includes in its memb ership more than three hundred companies that are suppliers of products and se rvices to the bulk liquid storage industry.

ILTA member facilities include deepwater, ba rge, and pipeline terminals whose bulk liquid

commodities are essential to the national and international economies. These terminals interconnect with and provide se rvices to the various modes of bulk liquid carriers, including oceangoing tankers, barges, tank trucks, rail ca rs, and pipelines. The commodities handled include a variety of chemicals, crude oil, petr oleum products, renewable fuels, asphalt, animal fats and oils, vegetable oils, molasses, and fert ilizers. Customers who store products at these terminals include oil producers, chemical manufacturers, pr oduct manufacturers, food growers and producers, utilities, transportation compan ies, commodity brokers, government agencies, and the military.

ILTA believes that DHS regulation of gasoline stored in aboveground li quid terminals lacks a sound scientific basis. Therefore, it is arbitrary and capricious and should be rescinded. This position is supported by two arguments.

First, DHS is concerned that a terrorist atta ck against gasoline stor ed in aboveground liquid terminals could lead to an expl oding vapor cloud that could resu lt in significant offsite human life or health consequences. This is contrary to the best available scientific evidence that demonstrates that gasoline stored in aboveground liquid terminals does not pose a vapor cloud explosion risk in a security context for three pr imary reasons: (i) gasolin e stored in aboveground liquid terminals presents a de minimus vapor cloud explosion risk in general; (ii) it is unrealistic to conclude that any of the five attack scenar ios contemplated by DHS w ould create an explosive vapor cloud; and (iii) were a fire initiated by an attack, any vapor cloud explosion risk would be eliminated by the fire itself.

Second, in promulgating its chemical facility regulations, DHS generally followed the Environmental Protection Agency’s (“EPA”) Ri sk Management Program (“RMP”) rules that

cover accidental releases to determine Screening Thre shold Quantities (“STQs”). However, by including gasoline with a flamma bility hazard rating of 3 stored in aboveground liquid terminals, DHS unreasonably deviated from the RMP. Unless DHS’s concern is reasonable, that

intentionalattacks pose at least a similar (if not a greater) risk, DHS’s departure from the EPA RMP rules cannot withstand scrutiny. As this petit ion and its exhibits demonstrate, that concern

is not reasonable.4 For these reasons, ILTA is requesting that DHS declare gasoline stored in aboveground liquid terminals to be exempt from CFATS.

Additionally, it is ILTA’s position that DHS violated the Administrative Procedure Act (“APA”) when it added provisions covering mixtures to the final version of Appendix A to 6 CFR Part 27. DHS failed to provide notice that it proposed to include mixtures, such as gasoline.

This failure to provide notice was compounded fo r several reasons: (i) DHS’s prior issuances under the CFATS program (i.e., the proposed versi on of Appendix A to 6 CFR Part 27) excluded mixtures, such as gasoline; (ii) DHS issued a pub lic notice stating that it was significantly relying on the EPA RMP rules as a primary source for its rules; and (iii) a DHS o fficial gave specific and explicit assurance that the final version of Appendix A woul d exclude mixtures. When the mixtures provisions covering gasoline (§ 27.203(b)(1 )(v) and the related provision in § 27.204(a)(2)) were added without notice, DHS vi olated the “logical outgrowth test” governing adequate notice in APA rulemaking.

Furthermore, since the April 9, 2007 publication of the CFATS Inte rim Final Rule (“IFR”), DHS has issued (and continues to issue) “guidance” documents and information that contain binding requirements and applications. These “gui dance” documents and information go beyond the statute, the IFR, and the fina l version of Appendix A. Becau se DHS has not subjected these requirements to notice-and-comment, they also violate the APA.

And finally, DHS failed to consider the econo mic costs and impacts on the nation’s energy supply, as required by Executive Order 13211.

Therefore, pursuant to 5 U.S.C. § 554(e), I LTA hereby petitions DHS (and requests a prompt response under 5 U.S.C. § 555(e)) fo r a declaratory order terminating this controversy and removing uncertainty by declaring gasoline, as a mixture with an NFPA flammability hazard rating of 3, exempt from CFATS. Accordingly, as a permanent clarifying change to the Code of Federal Regulations, ILTA proposes the following revisions to Appendix A to 6 CFR Part 27 :

In section 27.203, revise the beginn ing of subparagraph clause (b)(1)( v) to delete references to fuels with flammability hazard ratings of 1, 2, and 3, so it reads as follows:

In fuels that have a flammability hazard rating of 4, as determined by using . . . .

In section 27.204, revise the first two sentences of subparagraph (a)(2) to delete the cross reference to § 27.203(b)(1)(v), so it reads as follows:

If a release-flammable chemical of in terest is present in a mixture in a concentration equal to or gr eater than one percent (1%) by weight of the mixture,

and the mixture has a National Fire Pr otection Association (NFPA) flammability hazard rating of 4, the facility shall count the entire am ount of the mixture toward the STQ. If a release-flammable chemical of interest is present in a mixture in a5 concentration equal to or gr eater than one percent (1%) by weight of the mixture,

and the mixture has a National Fire Pr otection Association (NFPA) flammability hazard rating of 1, 2, or 3, the facility need not count the mixture toward the STQ.

In addition, ILTA proposes co rresponding revisions to the preamb le to the final version of Appendix A as follows:

First, by revising the paragraph in the sec ond column of 72 Fed. Reg. 65,399, beginning with “Second,” to read as follows:

Second, facilities must also include chemical s of interest in fuels when stored in above-ground tank farms, includi ng tank farms that are part of pipeline systems. See § 27.203(b)(1)(v). This includes fu els with a National Fire Protection Association (NFPA) flammability hazard rating of 4. Fuels with an NFPA flammability rating of 1, 2, or 3 are excluded from DHS’s flammable mixtures provisions. EPA excludes these fuels by virt ue of the provisions in its mixtures rule for regulated flammable substances.

Second, by revising the third-from-the-last se ntence of the discussion of “c. Minimum Concentration (Mixtures)” that appears above the s ubheading “2. Release- Explosives” in the third column of 72 Fed. Reg. 65,402 by deleting the words “the entire weight of,” to read as

follows:

If a release-flammable chemical of in terest is present in a mixture in a concentration equal to or gr eater than one percent (1%) by weight of the mixture, and the mixture has an NFPA flammability hazard rating lower than 4 (i.e., NFPA flammability hazard rating of 1, 2 or 3), the facility need not count the mixture toward the STQ.

PART II. STATEMENT OF FACTS

A. The CFATS Rulemaking Process

Section 550 of Public Law 109-295 authorizes DHS to regulate s ecurity at high-risk chemical facilities. It provides that “no later than six months after the date of enactment of this Act,” DHS “shall issue interim final regulations” establishing risk-based performance standards for the security of chemical facilities, requiring vul nerability assessments, and the development and implementation of security plans. On Dece mber 28, 2006, DHS issued an advance notice of rulemaking discussing a range of regul atory and implementation issues. See 71 Fed. Reg. 78,276.

On April 6, 2007, two days after its statutor y six-month deadline, DHS filed with the Federal Register its IFR responding to the comments to the advance notice of rulemaking and establishing a new Part 27 to Title 6 of the Code of Federal Regulations. With the exception of Appendix A to Part 27, the regulation took effect on June 8, 2007. See 72 Fed. Reg. 17,688.6 DHS also released a proposed Appendix A contai ning a tentative Chemical of Interest (“COI”) list and sought public comment on the document until May 9, 2007. This preliminary COI list

identified over three hundred chemical substanc es with a proposed STQ for each. The proposed

COI list contained no mention of COI mixtur es, generally, or ga soline, specifically.

On November 20, 2007, DHS published in the Federal Register the final version of Appendix A and provided a final COI list with accompanying STQs. See 72 Fed. Reg. 65,396. However, the final version of Appendix A did more than revi se the proposed list of COIs and STQs. Among other things, it: (i) adjusted the STQ for many COIs; (ii) defined the specific Security Issue(s) implicated by each COI; and (iii) added ne w provisions on release-flammable mixtures. See 6 CFR §§ 27.203-.204.

When read together, the IFR and the final versio n of Appendix A require ch emical facilities that meet or exceed the STQ for a particular COI to submit an electronic COI evaluation to DHS. Known as the “Top-Screen,” this evaluation perm its DHS to make a preliminary determination regarding the facility’s risk status. If DHS prel iminarily concludes that the facility is not highrisk, then no further action is requ ired, barring a material modification.

On the other hand, if DHS initially conclude s that the facility is high-risk, then DHS preliminarily places the facility in to one of four risk-t iers (Tier 1 through Tier 4) and requires the completion of a Security Vulnerability Assessme nt (“SVA”). Following review of the SVA, DHS confirms or modifies each facility’s pre liminary risk-tier determ ination. Facilities that remain high-risk are then required to complete a Site Security Pl an (“SSP”) that incorporates, as applicable, the CFATS Risk-Based Performance Standards.

B. CFATS and the Treatment of Gasoline

Gasoline is a mixture of various hydrocarbons and is c onsidered a Class 3 flammable liquid by

the NFPA. Gasoline is not an Appendix A COI, though some disc rete chemicals that comprise a minority concentration of gaso line (e.g., butane) are COIs.

There is no mention of gasoline within the IFR. Gasoline was introduced in to the regulation in 6 CFR § 27.203(b)(1)(v): “in calculating whether a facility possesses an amount that meets the STQ for release chemicals of intere st, the facility shall only include release chemicals of interest ... [i]n gasoline, diesel, kerosene or jet fuel (i ncluding fuels that have a flammability hazard ratings of 1, 2, 3, or 4) ... stored in aboveground tank farms, including tank farms that are part of pipeline systems....”

The requirement that facilities include releas e-flammable COIs in gasoline represents an exception to the otherwise narrow release- flammable mixtures provision of 6 CFR § 27.204(a)(2). In other words, but for the combination of 6 CFR § 27.203(b)(1)(v) and the second sentence of 6 CFR § 27.204( a)(2), facilities would not include quantities of release-flammable COIs present in gasoline toward the applicable STQ.7 C. Top-Screen Submissions

Certain ILTA member companies submitted Top-Sc reens to DHS on or before January 22, 2008. The initial version of the Top-Screen then requ ired by DHS did not so licit specific questions regarding gasoline storage, a nd, at that point, DHS had not provided sufficient or clear instructions regarding how to account for release-flammabl e mixtures on the Top-Screen.

Despite the deficiencies in the process and the inherent inaccuracies of the data produced by it— a problem that DHS later recognized and attempte d to correct through the addition of gasolinespecific Top-Screen questions in November 2008—DHS used the January 2008 Top-Screen submissions to make initial decisions regardi ng preliminary risk pursuant to 6 CFR § 27.220.

Beginning the week of June 23, 2008, DHS notified approximately 435 facilities that they were initially designated high-risk due solely to the presence of the “COI” gasoline, provided each with a preliminary risk-based tier, and directed the completion of the SVA within a prescribed

time.

ILTA believed (and still believes) that DHS improperly included gasoline stored in aboveground liquid terminals as preliminarily high-risk. ILTA—together with the American Petroleum Institute (“API”), the Associa tion of Oil Pipe Lines (“AOPL”), and the National Petrochemical and Refiners Association (“NPRA”)—sought info rmation from DHS regarding its rationale. 1

DHS met with API, AOPL, ILTA, and NPRA repr esentatives in a classi fied briefing on August 14, 2008. During the briefing, the indus try representatives raised specific sc ientific questions regarding DHS’s faulty modeling of the vapor cl oud explosion risk posed by gasoline stored in aboveground liquid terminals.

DHS agreed to discuss the matter further and re quested additional information from the industry associations. Soon thereafter, on August 26, repr esentatives of ILTA and AOPL met with the

DHS Private Sector Office and the Infrastructu re Security Compliance Division (“ISCD”) to express industry’s concerns about DHS’s lack of receptivity to perceived flaws in the rulemaking process. During this meeting, the industry re presentatives were requested to co-develop a technical paper explaining the risks posed by ga soline. On October 3, 2008, API, AOPL, ILTA, and NPRA provided a technical re port to DHS entitled “Risks A ssociated with Gasoline Storage Sites” (the “Gasoline White Paper”). See Exhibit A.

On October 7, 2008, fully “aware that a significant number of gasoline storage facilities that previously submitted Top-Screens ... intend to file revised Top-Screens ... as a result of errors in the original Top-Screens or material modifications to the facilities’ operations or site,” DHS sent letters to facilities preliminarily determined to be high-risk due to “a significant quantity of gasoline.” The letters indicated that new gasoli ne-specific questions woul d be added to the TopScreen on or about October 14, 2008. DHS stated that the addition of “a few new questions” to the Top-Screen would provide “additional informa tion for evaluating the potential consequences

1 API, AOPL, and NPRA are not co-petiti oners in this administrative action.8 associated with gasoline storage facilities.” See Exhibits B and C. Ap proximately four hundred facilities resubmitted the Top-Screen by th e November 14, 2008 resubmission deadline.

On December 10, 2008, DHS responded to the Gasolin e White Paper, stating that “we disagree with your conclusion that DHS is overstating the risks associated with gasoline storage facilities.” DHS expressed confidence that the gasoline “modeling approach we have applied ... is reasonable and appropriate.” DHS indicated that it was “in the pr ocess of evaluating the roughly 400 Top-Screen resubmissions” an d invited API, AOPL, ILTA, and NPRA representatives to engage in additional dialogue w ith DHS if the industry be lieved “there to be significant new technical or factual issues th at DHS has not previously considered.” See Exhibit

D.

In a December 22, 2008 letter to DHS, the industry a ssociations accepted this offer to engage in additional dialogue. Furthermore, the letter st ated that DHS, in rejecting the conclusions presented in the Gasoline White Paper, failed to allow industry “to understand how the DHS application of EPA’s vapor cloud explosion model in a security application shou ld differ from the results developed un der a safety context.” See Exhibit E.

On February 13, 2009, DHS notified the approximat ely four hundred facilities that submitted a revised Top-Screen whether they remained prelim inarily high-risk and, if so, their tier ranking.

For the 355 facilities that retain ed their preliminarily high-ris k status, DHS established May 14, 2009, as the SVA submit tal deadline.

API, AOPL, ILTA, and NPRA representative s met with DHS officials on April 24, 2009. Although DHS first proposed such a meeting in its December 10, 2008 letter, DHS scheduled

and cancelled it several times: January 12, February 19, February 23, March 27, April 9, and April 15, 2009. At the meeting, DHS primarily fo cused its discussion around the idea of forming a scientific panel under the Fe deral Advisory Committee Act (“FACA”). The panel’s purpose would be to explore the scientific basis fo r conclusions reached by DHS. DHS was not, however, prepared to discuss th e issues raised by industry in its December 22, 2008 acceptance letter. During the meeting, ILTA notified DHS that it would be subm itting this petition. Subsequently, on May 4, 2009, DHS notified industry that it was suspending all efforts toward the formation of a FACA panel.

PART III. ARGUMENT

A. Substantive Deficiencies

1. There is no Rational Basis to Conclude that Gasoline Presents a Risk of Forming an Explosive Vapor Cloud in a Security Context

As the industry showed in the Gasoline White Paper, and as affirmed by Exhibits F, G and H, the

best available scientific evid ence demonstrates that gasolin e stored in aboveground liquid terminals does not pose a va por cloud explosion risk.9 Although ILTA recognizes that the application of CFATS ( intentional threats to public health and safety) and EPA’s RMP rules ( accidental threats to public health and safety) are somewhat different, the goals of these agencies are the same: preventing harmful consequences, whatever their origin.

Indeed, the regulation of thres hold quantities of flammable subs tances at stationary sources under EPA’s RMP rules parallels th e regulation of COIs under CFAT S. Despite this similarity, the only justification DHS has proffered to sup port its departure from EPA is a “concern that [aboveground terminals] could create significant [off site] human life or health consequences if an intentional attack by a terrorist were successful.” 72 Fe d. Reg. 65,399. This is a conclusory

statement that has no basis in the rulema king record or in any other record.

In its response to the Gasoline White Paper, DHS stated:

As demonstrated by the B uncefield incident, a vapor cloud explosion at a gasoline terminal is possible, given the right se t of physical and atmospheric conditions. DHS determined that the vapor cloud e xplosion model accurately reflects a plausible worst-case scenario within real istic parameters when calculating offsite consequences of an explosion involv ing release-flammable COIs, including gasoline.

See Exhibit D.

DHS’s heavy reliance on the December 11, 2005 in cident at the Buncefield Oil Storage and Transfer Depot in Hertfordshire, England, wher e no fatalities occurred, is unsupportable as a plausible outcome for an intentional attack. Buncefield shows how a confluence of prolonged and unlikely procedural and maintenance negl igence, unusual tank farm configuration and geometry, and rare atmospheric co nditions could create a very da maging incident. Nonetheless,

ILTA submits that the rare conditions that comb ined to create the Buncefield incident are highly distinguishable from those in the U.S. gasoline te rminal industry and have no relationship to the type of terrorism scenarios that are DHS ’s reasonable and appropriate concern. See generally

B UNCEFIELD M AJOR I NCIDENT I NVESTIGATION B D

., T HE B UNCEFIELD I NCIDENT 11 D ECEMBER
2005 F INAL R EPORT (2008). This statement is supporte d by the following facts:

(a) The Buncefield incident involved an accidental overflow of a fuel storage tank. This is very different from the possible results from any of the DHS attack scenarios applicable to release-flammable COIs;

(b) At Buncefield, product rapidly escaping from multiple overhead tank vents promoted rapid evaporation, thereby atomizing vapors an d providing flow across an extraordinarily large wetted surface. Such an occurrence is unusual in a spill scenario. “The Investigation has demonstr ated that ‘overtopping’ a tank with highly flammable fuel is more likely to produce a potentially10 explosive mixture than pooling from a lo wer level escape, such as may result from a tank failure;” 2

(c) Conditions on the morning of the overfill, including a calm night and stable atmosphere, were ideal for a stagnant vapor cloud to form in low-lying areas in and around the facility. For any part icular location, this combination of conditions is highly unlikely to occur at any given time;

(d) The protracted overflow event lasted for over forty-one minutes. This permitted the rapid formation of gasoline vapors in air. These vapors had to be within a very narrow concentrat ion range between gasoline’s lower explosive limit of 1.4% and upper expl osive limit of 7.6% to allow for ignition. In contrast, a tank that fails as a result of deliberate attack would begin to release its contents in the presence of an ignition source, thereby resulting in an immediate fire rather th an a protracted discharge allowing for vapor release and a possible explosion; 3

(e) Multiple alarms and automated emergency shut-off equipment had been disabled or failed. In normal operati ng scenarios, these would have been expected to provide redundant layers of protection against an overfill, including an immediate halting of pumpi ng operations and/or prompt alerting of plant personnel;

(f) The released fuel reportedly had a butane content of approximately ten percent and would have ha d a relatively high vapor pr essure (i.e., it would be capable of evaporating rapidly to produce a flammable vapor); and

(g) There was a dense concentration of obstacles surrounding the overflowing tankage, including piping, pump buildi ngs, and even neighboring trees. The congestion helped enable the flame front to accelerate. The configuration at

Buncefield has been rec ognized as more congested than most gasoline

terminals in the United States.

2 This quote is taken from the Buncefield Investigation Board’s initial report, which was released in 2006. The Final Report essentially confirms this statement, although not as concisely, stating that if petrol “is spilt or otherwise released (eg catastrophic tank failure) it will form a pool of stable liquid on th e ground. . . . However, even with 10% butane, a winter grade of petrol is very unlikely to give ri se to a large cloud of vapour , simply because the rate of generation is low and any air movement (wind) would aid its dispersal and dilute the cloud to below the lower flammability limits within a ‘relatively’ short distance. . . . At Buncefield, it seems likely that much higher rates of evaporation were achieved as a result of the manner in which the liquid was discharged from the tank.”

B UNCEFIELD I NVESTIGATION F INAL R EPORT at 90.

3 Once a fire is initiated, any further vapor accumulation is prevented, thereby prec luding the possibility of a subsequent vapor cloud explosion.11 These differences not only are highlighted in th e Gasoline White Paper but also are supported in the attached exhibits commissioned by ILTA from independent experts, namely AcuTech Consulting Group (“AcuTech”), Baker Engineer ing and Risk Consulting (“Baker”), and Williams Fire and Hazard Control (“Williams”). As indicated by Williams in particular, “it is unlikely all conditions ... could be humanly duplicated to repeat a ‘Buncefield- like’ incident.”

Indeed, it is difficult to envision a terrorist attack capable of initiating an overfill scenario that would go undetected for a sufficient enough time to enable the formation of a gasoline vapor cloud—even if the confluence of product identif ication and availabili ty, unlikely weather conditions, and plant “congestion” necessary for the type of exploding vapor cloud that could produce significant offsite consequences were present.

It is worth noting that nowhere in the final Buncefield Inve stigation Report is there any

conclusion that this incident c ould bear any relevance to enhan ced risks due to terrorism, known all too well in the UK. This is particularly notable since the Chair of the Major Incident Investigation Board, Lord Newton of Braintree, also chaired the UK Committee that reviewed the operation of the Anti-terrori sm, Crime and Security Act 2001.

Therefore, if the Buncefield incident remains pa rt of the DHS calculus, DHS has a responsibility to demonstrate how circumstances allowing such an incident align in the context of a plausible terrorist attack. Considering th at none of the terrorism scenar ios contemplated by DHS envision a protracted attack that would enable the form ation of a vapor cloud, su ch an explanation is especially necessary. This is s upported by the following conclusions:

Exhibit F, Williams Letter (page 2) : “While there is no doubt if any of the attack scenarios were executed effectively, it/they would result in a release of product and ignition. However, none of them support an incident resulti ng in an offsite event and in ou r experience, the DHS conclusions

are unrealistic.”

Exhibit G, AcuTech Statement (pages 4–5) : “Each of [the DHS scenarios relevant to releaseflammable COIs] involve a violen t attack against the asset usi ng a weapon ranging from a large explosive charge directly applied in a VBIED or applied from a stan doff distance causing a maximum initial impact. It is clear that the lik ely outcome of such an attack would be a high energy impact and immediate ignition rather than a delayed ignition. Once ignition generates a fire, any risk of subsequent vapor cloud forma tion and explosion is en tirely eliminated. In considering the initi ating scenario, DHS should consider that flammable releases of gasoline are likely to immediately ignite. If not, DHS would be forced to postu late a wide variety of potential scenarios. Regarding the likelihood of the in itiating event itself, DHS should weigh carefully

whether terrorists would be interested in attack ing a gasoline terminal relative to numerous other available targets. This is especially important considering that an at tack would most likely produce a pool fire and not a vapor cloud explosion.”

Exhibit H, Baker Statement (page 4) : “We determined that aircra ft attack, assault team, and stand-off weapon scenarios are all lik ely to result in a re lease of gasoline, but these attacks would provide prompt sources of ign ition and would result in fires, not vapor cloud explosions. The12 Vehicle Borne Improvised Explosive Device (VBIED) attack scenario is not expected to cause a significant release of gasoline at the distances specified by the DHS based on testing performed by the US Army Corps of Engineers.”

2. By Including Gasoline Stored in Aboveground Liquid Terminals, DHS Arbitrarily and Capriciously Deviated From EPA’s RMP Rules

a. EPA regulates potentially disastrous accidental releases of chemicals

Under the Clean Air Act (“CAA”), EPA regulates acci dent prevention in chemical facilities. The intent of the chemical accident prevention provisions is “to focus on chemicals that pose a significant hazard to the community should an accident occur, to prevent their accidental release, and to minimize the consequences of such releases.” 59 Fed. Reg. 4,479 (Jan. 31, 1994).

Section 112(r)(3) of the CAA require d EPA to promulgate a list of “regulated substances” that are “known to cause, or may be r easonably anticipated to cause, d eath, injury, or serious adverse effects to human health or the environment if accidentally released” and to establish threshold quantities for each. Id . Congress statutorily required EPA to include certain chemicals.

In January 1994, EPA adopted its “List Rule,” which became effective on March 2, 1994. EPA

included more than one hundred substances divi ded among three categories: toxics, flammables, and explosives. Subject to ce rtain limitations, facilities possessing more than a threshold quantity of a List Rule substance were requi red to implement EPA’s regulations “for the prevention and detection of accidental releas es and for responses to such releases.” See 59 Fed. Reg. 4,479.

Less than one month later, on March 29, 1994, API a nd other parties filed petitions for review challenging the List Rule in the United States Court of Appeals for the District of Columbia Circuit. Among other arguments, API claimed th at (i) broad inclusion of certain flammable liquid mixtures places a substantial burden on i ndustry without any environmental, health or safety benefit, and (ii) including methan e on the list without a thorough review and understanding of the scientific evidence for such inclusion places a substantial burden on industry without any environmental, health or safety benefit.

In March 1996, EPA entered into a settlement of this litigation and agreed, among other things, to amend the List Rule “to provide that flammabl e regulated substances in gasoline used as fuel for internal combustion engines and flammable regulated substances in naturally occurring hydrocarbon mixtures prior to init ial processing in a petroleum re fining process unit or a natural gas processing plant (‘gas plant’ ) need not be included when de termining whether a threshold quantity is present at a stationary source.”

Pursuant to the settlement agreement, EPA i ssued a notice of proposed rulemaking on April 15, 1996. Among other things, EPA proposed the modi fication of threshold provisions to exclude “flammable substances in gasoline” and othe r flammable mixtures. 61 Fed. Reg. 16,606. After receiving twelve letters in support of the exemption of gasoline, and no letters of opposition,13 EPA adopted the proposed amendments on January 6, 1998 as a Final Rule. 63 Fed. Reg. 640. EPA stated that it “is exempting gasoline because it does not meet the NFPA 4 criteria . . . [and] does not represent a significant threat to the p ublic of vapor cloud explosions.” 63 Fed. Reg. 641–42. EPA now excludes “regulated substances in gasoline, when in distribution or related storage for use as fuel for internal combus tion engines . . . .” 40 CFR § 68.115(b)(2)(ii).

b. Until it added the new prov ision § 27.203(b)(1)(v) in the fin al version of Appendix A, DHS had relied heavily on EPA’s RMP rules

In its advance notice of rulemaking, DHS referenced EPA’s RMP regulation:

As the RMP chemical list and threshold limits were established by EPA based on a chemical’s potential for acute offsite he alth impacts in the event of a large air release, the Department believes that a number of the faci lities regulated under this program may also qua lify as “high-risk ” facilities covere d under Section 550.

71 Fed. Reg. 78,279.

In the preamble to the IFR, DHS again indica ted that the RMP list was a significant (though not the only) source to develop its own COI list. 72 Fed. Reg. 17,696. DHS also acknowledged that several industry commenters suppo rted using the RMP list both to he lp identify the initial group of regulated facilities an d as a basis for selectin g chemical facilities. See 72 Fed. Reg. 17,697. It further acknowledged that “one a ssociation felt that DHS should link its definition of chemical facility to those facilities covered by EPA’s RMP, because it is a clear and defined list.” Id

.

In the final version of Appendix A, DHS followed EPA’s RMP in a number of particulars. It indicated that “[t]o identify the release chemicals for Appendix A, the Department looked to the

list of substances in the EPA’s RMP rule.” 72 Fed. Reg. 65,401. DHS “adopted the EPA RMP [threshold quantities], because DHS accepts the same rationale that EPA used when setting its [threshold quantities]—i.e., that they are amounts th at, if released, have the potential to create significant human health effects.” Id . DHS stated that “in developing these [threshold quantities], EPA collected extensive input and conducted a thorough analysis, and DHS wants to leverage that knowledge base.” Id . Accordingly, DHS explained that:

For release-flammable chemicals, DHS also uses the same listing criteria as EPA

does for release-flammable chemicals. EPA, and now DHS, identifies flammable gases and volatile flammable liquids base d on the flash point and boiling point criteria that the NFPA uses for its highes t flammability hazard ranking (Class IA).

Id

.

Logically, therefore, DHS also adopted excl usions in §27.203(a) that track many of the exclusions from the RMP rules. DHS reasoned that the exclusions were appropriate “because

chemicals in such circumstances or forms ar e unlikely to contribute to the potential consequences of a successful attack.” 72 Fed. Reg. 65,398.14 c. Even though EPA, after due consideration, exempted gasoline from its RMP rules, DHS included gasoline, notw ithstanding that the risk of offs ite consequences from an

accidental release is considered to be greater than from any reasonably anticipated terrorism scenario postulated by DHS

As demonstrated in the attached exhibits, gasoline vapor clouds develop in tank farms only in extremely rare circumstances involving overfills or other slow leaks that maximize evaporation, along with specific meteorological conditions a nd unusual physical congestion at the facility. Only after a cloud of sufficient size and density has developed is it possible for the cloud to ignite and result in severe offsite consequences. The normal conse quence of a gasoline release is a pool fire that burns with onsit e, localized consequences.

All of the terrorist scenarios envisioned for rele ase-flammable COIs involve kinetic events that could be expected to pierce a tank. Yet, even if the attack pierced one or more tanks, the expected result would be an immediate fire, which would itself remove the possibility of a vapor cloud build-up . In this sense, the terrorism threat poses less hazard of offsite consequences than operator negligence.

Despite a heavy reliance on EPA’s RMP rules and the contradiction inherent in DHS’s application of CFATS to less dangerous scenarios than t hose exempted by EPA, DHS specifically includes gasoline. DHS did this by re quiring that “fuels with any one of the four [NFPA] flammability hazard ratings and not just fuels with an NFPA flammability hazard rating of 4” be considered pursuant to § 27.203(b)(1)(v). This provision exists despite the fact that “EPA excludes these fuels by virtue of the provisions in its mixtur es rule for regulated flammable substances [in 40 CFR 68.115(b)(2)(ii)].” 72 Fe d. Reg. 65,399. DHS further introduced the coverage of “gasoline,” per se , in § 27.203(b)(1)(v).

Why did DHS see fit to make this extraordinary departure from the EPA RMP rules? It was not in response to public comment recommending an exception to the RMP rules, the inclusion of flammable liquids with an NFPA hazard rating of 1, 2 or 3, or th e express inclusion of gasoline

within the final version of A ppendix A. Rather, DHS justif ied this inclusion through an unsubstantiated claim that these fuels have “the poten tial to create a significant offsite impact in

the event of a successful a ttack.” 72 Fed. Reg. 65,399.

3. DHS Regulation of Gasoline Stored in A boveground Liquid Terminal s is Arbitrary and Capricious

Simply stated, DHS (i) has no rational basis for concluding that gasoline presents a vapor cloud explosion risk; (ii) improperly rejected EPA preced ent; and (iii) disregarded expert opinion. As a result, DHS’s inclusion of gasoline in the CF ATS regulations is arbi trary and capricious.

Courts may set aside an agency action as an abuse of discre tion on any of several grounds. See 5 U.S.C. § 706(2)(A). According to the Amer ican Bar Association’s “Blackletter on Administrative Law,” commonly applied bases for judicial reversal include the following

formulations:15 • The asserted or necessary factual premises of the action do not withstand scrutiny;

• The action is unsupported by any explanati on or rests upon reasoning that is seriously flawed;

• The agency failed, without adequate justification, to give reasonable consideration to an important aspect of the problems presented by the action,

such as the effects or costs of the policy choice involved, or the factual circumstances bearing on that choice;

• The action is, without legitimate reason and adequate explanation, inconsistent with prior agen cy policies or precedents;

• The agency failed, without an adequate ju stification, to cons ider or adopt an important alternative solution to the problem addressed in the action; or

• The agency failed to consider substant ial arguments, or respond to relevant and significant comments, made by the participants in the proceeding that gave rise to the agency action.

By including § 27.203(b)(1)(v), DHS committed a numbe r of these errors. Its asserted factual premises do not stand scrutiny, as evidenced by E xhibits F, G, and H. DHS’s explanation to industry associations for the addition of gasoline to the final version of Appendix A, and some of its responses in its rebuttal to the Gasoline White Paper, were conclusory and “unsupported by any explanation.” Its inclusion not only was inconsistent with th e Department’s overall reliance on the EPA RMP rules but, as eviden ced by Exhibit I, was also contrary to assurances given to ILTA by an ISCD official. DHS failed to consider the alternative of exempting all gasoline stored in aboveground liquid terminals unless cert ain conditions were found, instead of including

them unless certain conditions were not found. DHS also did not give affected parties a chance to comment on the proposal before adopting it.

It is not enough for DHS simply to seek deferen ce because of its general technical expertise in security matters. See Tripoli Rocketry Ass’n v. Bureau of Alcohol, Tobacco, Firearms and Explosives , 437 F.3d 75 (D.C. Cir. 2006). In Tripoli , which also involved fuel flammability, the Bureau of Alcohol, Tobacco, Firearms, and Expl osives classified a propellant used by hobby rocket enthusiasts as an “explosive” based on it s determination that th e propellant functions by “deflagration.” Id . at 81.

The court found that this determ ination was arbitrary and capricious because the agency did not offer a clear explanation for its classification of th e fuel, never revealed how it determined that it deflagrates, and never specified a range of veloc ities that can lead a material to deflagrate. Id

. The court prefaced its conclusion by stating that it “routinely defers to administrative agencies on matters relating to their areas of technical expertise.” Id . at 77. Nonetheless, it failed to sustain the agency’s determination and remanded it, stating “[w]e do not, however, simply accept whatever conclusion an agency proffers merely because the conclusion reflects the agency’s judgment.” Id

.16 B. Procedural Deficiencies

DHS has violated the APA’ s rulemaking provisions.

1. The Rulemaking Violated the Logical Outgrowth Test

Congress generally permitted DHS to use interi m final rulemaking in the CFATS program, at least until April 4, 2007. When DHS sought comments on Appendix A se parately, however, it engaged in the more orthodox notice-and-comm ent rulemaking. DHS provided a thirty-day comment period, starting on April 6, 2007, and stated:

Interested persons are invited to part icipate in this rulemaking by submitting written data, views, or arguments on Appe ndix A of this interim final rule. Comments that will provide the most assistance to DHS in finalizing the Appendix will reference specific chemi cals and Screening Threshold Quantities on the list, explain the reason for any recommended change, and include data, information, or authority that s upport such recommended change.

72 Fed. Reg. 17,688.

The notice gave no indication that DHS was consid ering the two new provisions that were added in November 2007, which went far beyond the terms of proposed Appendix A. The addition of 6 CFR §§ 27.203–.04 is, thus, a violation of the logical outgrowth test—the standard test for determining whether agencies have , by virtue of significan t changes in their final rule, failed to give sufficient notice in thei r notice of proposed rulemaking.

No precise definition exists for what constitu tes a “logical outgrowth,” though courts have offered guidance. For example, a 1997 D.C. Circuit case stated:

Our cases offer no precise definition of what counts as a “logical outgrowth.” We ask “whether ‘the purposes of notice and comment have been adequately served.’” Notice was inadequate when “the interested parties could not reasonably have ‘anticipated the final ru lemaking from the draft [rule].’” “[W]e inquire whether the notice given afford s ‘exposure to diverse public comment,’ ‘fairness to affected parties,’ and ‘a n opportunity to deve lop evidence in the

record.’”

National Mining Ass’n v. Mi ne Safety & Health Admin.

, 116 F.3d 520, 531 (D.C. Cir. 1997); see also Chocolate Mfrs. Ass’n v. Block , 755 F.2d 1098, 1103 (4th Ci r. 1985) (remanding a USDA

rule as a result of a violation of the logical outgrowth test).

Indeed, there was a consensus amon g CFATS commenters that Appendix A only applied to pure

chemicals , a belief supported by the exclusion of any mixture provisio ns in the April 9, 2007 rulemaking, the complete absence of any reference to mixtures in the June 2007 and September17 2007 Top-Screen User’s Manuals, and by DHS’s ow n statements and representations to the industry.

A review of comments submitted to the record s upports the conclusion that the final version of Appendix A was not a logical outgrow th of the proposal. Indeed, the sheer volume of comments

DHS received demonstrates that various industries understood Appendix A to apply only to pure

chemicals:

• The American Chemistry Council stated th at “[a]ny list-based regulatory program inevitably generates complicated questions regarding their application to mixtures of chemicals, both mixtures of listed chemicals and mixt ures of listed and unlisted chemicals. DHS has indicated that, at this time, it intends to avoid these questions by only addressing ‘neat’ or full-strengt h quantities of Appendix A chemicals.” Letter from Thomas J. Gibson, Senior Vice President of Advocacy, Am. Chemistry Council, to Dennis Deziel, Infr astructure Sec. Compliance Div., Dep’t of Homeland Sec. (May 9, 2007).

• The American Forest and Paper Associati on (“AF&PA”) stated “[ o]ne of the most important things for avoiding confusion and unnecessarily casting the net too widely is clarification that the chemical listings in Appendix A generally apply to the pure chemical compound, rather than to the chemical compound when

contained in a mixture. AF&PA understa nds this to be DHS ’ intent, and AF&PA fully supports that approach, and the re mainder of these comments is written based on that understanding. That approach avoids numerous implementation questions and problems that would arise if mixtures containing a chemical listed in Appendix A triggered the requirement to prepare a Top-Screen analysis. In addition to the difficulty for DHS of de termining appropriate STQs for various mixtures, the inclusion of mixtures in Appendix A would vastly complicate a facility’s determination of whether any ST Qs are exceeded at th e facility. The net result would be to frustrate the purposes of the quick initial screening of facilities to determine which ones truly have the potential to be high-risk.” Letter from John L. Festa, Ph. D., Senior Scientist, American Forest and Paper Ass’n, to Dennis Deziel, Infrastructure Sec. Co mpliance Div., Dep’t of Homeland Sec. (May 9, 2007).

• The Agricultural Retailers Association stat ed that it “agrees with DHS that pure chemical products, not mixtures or ble nds, are the primary focus of these new chemical regulations.” Letter from J ack Eberspacher, President and CEO, Agricultural Retailers Ass’n, to Dennis Deziel, Infrastructure Sec. Compliance Div., Dep’t of Homeland Sec. (May 9, 2007).

• The Chemical Sector Coordinating C ouncil stated that its comments “were provided with the understanding that the ch emical listings in [proposed] Appendix A generally apply to the pure chemical compound, rather than the chemical compound when contained in a mixtur e.” Letter from the Chem. Sector18 Coordinating Council et al., to Dennis Deziel, Infrastructure Sec. Compliance Div., Dep’t of Homeland Sec. (May 9, 2007).

• The Chemical Producers and Distributors Association stated “[t]he following comments are provided with the understand ing that the chemical listings in Appendix A are limited to “pure” chemicals and do not include substances found

in a chemical mixture.” Letter from the Chemical Producers and Distributors Ass’n, to Dennis Deziel, Infrastructure Sec. Compliance Div., Dep’t of Homeland Sec. (May 9, 2007).

• The Corn Refiners Association stated th at it “understands that DHS intends to address only pure or full-st rength quantities of Appe ndix A chemicals. We strongly support this appro ach.” Letter from Jennife r White Snyder, Senior Director Regulatory Affairs, Corn Refiners Ass’n, to Dennis Deziel, Infrastructure Sec. Compliance Div., Dep’t of Homeland Sec. (May 9, 2007).

• Far West Agribusiness Association “ understood that the chemicals noted on Appendix A were to exclude blended products (mixtures), since the primary focus were pure chemical products.” Letter from Scott McKinnie, President Far West Agribusiness Ass’n, to Dennis Deziel, Infr astructure Sec. Compliance Div., Dep’t of Homeland Sec. (May 7, 2007).

• The National Agricultural Aviation Associat ion stated that it “agrees with DHS that pure chemical products, not mixtures or blends, are the primary focus of these new chemical regulations.” Letter from Andrew D. Moore, Executive Director, National Agricultural Aviation Ass’n, to Dennis Deziel, Infrastructure Sec. Compliance Div., Dep’t of Ho meland Sec. (May 9, 2007).

• The National Chicken Council, the U.S. Poultry & Egg Association, and the National Turkey Federation stated “[f]r om our inquiries to DHS technical assistance, it is our understanding that mixtures are not to be counted in determining threshold quantities and onl y pure or neat chemicals shall be considered.” Letter from George Watts , President, Nat’l Chicken Council, Don Dalton, President, U.S. Poultry and Egg Ass’n, and Joel Brandenberger, President, National Turkey Federation, to Dennis Deziel, Infrastructure Sec. Compliance Div., Dep’t of Ho meland Sec. (May 8, 2007).

• The National Petrochemical and Refiners Association stated that “Appendix A should clarify that, for purposes of calcul ating the [STQ] for a [COI], the facility shall aggregate only the quantities of pure chemical that are present on site, and

exclude amounts of such chemical containe d within a solution or mixture of other substances, chemicals or water. If DHS intends for facilities to incorporate chemicals contained in mixtures, the Depa rtment must provide clear, specific guidance to industry, keeping in mind any COI that exists as a component of a solution or mixture possesses characteristic s that are inherently different and less19 attractive than the characteristics of th e pure COI.” Letter from Charles T. Drevna, Executive Vice President, Nat’l Petrochemical and Refiners Ass’n, to Dennis Deziel, Infrastructure Sec. Co mpliance Div., Dep’t of Homeland Sec. (May 9, 2007).

The need for notice-and-comment is more significant when an agency departs from its articulated policy. In April 2007, ILTA e-mailed Dennis Deziel, a DHS official in the ISCD.

The e-mail asked Mr. Deziel to confirm his c onversation with ILTA, specifically that:

Blended fuels containing threshold quant ities of Appendix A chemicals are excluded from [CFATS]. The Appendix A list of chemicals and threshold quantities which trigger top- screen participation...are for NEAT products ONLY. A blend matrix or mixture policy has not been addressed and as such, blends or

mixtures are not included in the rule as presented.

See Exhibit I.

Mr. Deziel responded that “[ILTA ] has correctly summarized our position, yes.” This e-mail exchange occurred on April 5, 2007, just days before the issuance of proposed Appendix A on April 9. Given that specific assurance—and in dustry’s reliance on it—the addition of the fuel mixture provisions in the fina l version of Appendix A was comp letely unexpected and provides more evidence to suggest that DHS vi olated the logical outgrowth test.

Courts have limited agency discretion to change prior interpretations without using notice-andcomment rulemaking. In Paralyzed Veterans of Am. , the court concluded that “[o]nce an agency gives its regulation an interpretation, it can only ch ange that interpretation as it would formally modify the regulation itself: through the pr ocess of notice and comment rulemaking.” Paralyzed Veterans of America v. D.C. Arena LP, 117 F.3d 579, 586 (D.C. Cir. 1997).

In Alaska Professional Hunters , the D.C. Circuit held that “[ w]hen an agency has given its regulation a definitive interpretation, and later signi ficantly revises that interpretation, the agency

has in effect amended its rule” and mu st use notice-and-comment rulemaking. Alaska Prof’l

Hunters Ass’n v. Federal Aviation Admin. , 177 F.3d 1030, 1034 (D.C. Cir. 1999). The court emphasized that “[t]hose regulated by an administ rative agency are entitled to ‘know the rules by which the game will be played.’” Id . at 1035. The D.C. Circuit reaffirmed the decision in 2003.

See CropLife Am. v. Envtl. Protection Agency , 329 F.3d 876 (D.C. Cir. 2003).

The Fifth Circuit has held similarly, stating in Shell Offshore “[w]e agree with the reasoning of the D.C. Circuit; the APA requires an agency to provide an opportunity for notice and comment before substantially altering a well es tablished regulatory interpretation.” Shell Offshore, Inc. v. Babbitt, 238 F.3d 622, 629 (5th Cir. 2001). In cases wh ere agencies change interpretations of a regulation without the opportunity for notice-and-comment, the Sixth Circuit has agreed. See e.g., Dismas Charities, Inc. v. United States Dep’t of Justice , 401 F.3d 666, 682 (6th Cir. 2005).20 These cases have been applied most clearly an d aggressively when the previous policy was longstanding and where par ties had reasonably and ju stifiably relied on it. The very fact that commenters generally did not pr offer comments on mixtures (a side from reiterating their understanding that mixtures were excluded from Appendix A) demonstrates the reasonableness and pervasiveness of industry’s reliance. This is reinforced by the knowledge that DHS was heavily relying on EPA’s RMP rules, which had not covered “flamma ble substances in gasoline.”

Had industry known that mixtures were the subject of consideration, ther e is little doubt—given the volume and sophistication of the comments that DHS did receive during the notice-andcomment period—that commentators would have specifically addres sed mixture issues in great

detail. See Doe v. Rumsfeld , 341 F. Supp. 2d 1, 16–17 (D.D.C. 2004) (“For a plaintiff to establish prejudice on the basis of a “logical ou tgrowth” argument, a plaintiff generally must show ... that, ‘had proper notice been provided, they would have submitted additional, different

comments that could have invalidated the rationale for the revised rule ...’”).

This deficiency cannot be justified by the sugg estion that the November 2007 final version of Appendix A was simply an extension of the inte rim final rulemaking procedure. This argument is not supportable: as noted above, when DHS sought comments on Appendix A in its April 2007 notice of proposed rulemaking, it engage d in the more orthodox notice-and-comment rulemaking. At that point, the statutory six-m onth period for issuing interim final rules had expired, and the November 2007 amendments were promulgated long after that deadline.

Were DHS to argue that this was simply a second or “follow-on” “interim final rulemaking” that was not required to comply with the APA, then the six-month time limit on DHS would have been nugatory. DHS could have simply issued a brief or vague rule before the April 9, 2007 deadline, and then continued to amend it withou t notice-and-comment for the remaining months of the effective date period (i .e., until October 2009 when Sec tion 550 expires on its own terms).

DHS may also claim that these were emergenc y rules or that it had good cause to find that notice-and-comment was “impractical” or “contra ry to the public interest.” 5 U.S.C. § 553(b)(B). But this argument is unavailing. First, DHS must make that assertion at the time of the rulemaking. Second, this exemption is narrow. It is not sufficient for an agency to merely cite the health or safety applications or be nefits of a rule—otherwise the exemption would swallow the provision. See Action on Smoking & Health v. Civil Aeronautics Bd. , 713 F.2d 795, 800 (D.C. Cir. 1983).

2. DHS “Guidance” Has Not Been Subject to Notice-and-Comment

Since the April 9, 2007 rulemaking, DHS has issu ed (and continues to issue) “guidance” documents and information, such as the Top-Screen User’s Manuals and its Frequently Asked Questions (“FAQ”) webpage. These documents and resources (i) contain binding requirements and applications that go beyond th e statute, IFR, and the final ve rsion of Appendix A; (ii) are often inconsistent with each other; and (iii ) unnecessarily burden entities subject to the regulation.21 While agencies may avoid notice-and-comment by issuing either “int erpretative” rules or “statements of general policy,” DHS may not ci rcumvent the APA and add binding requirements

in this manner. One law review article summarized the position of the D.C. Circuit on this issue:

[A]n agency may use a “general statem ent of policy” to announce policymaking initiatives, but only if the resulting docu ment is wholly nonbinding. If an agency wishes to promulgate a more binding direc tive, it may use an “interpretative rule,” but only if the agency’s position can be ch aracterized as an “interpretation” of a statute or legislative regulation rather than as an exercise of independent policymaking authority.

John F. Manning, Nonlegislative Rules , 72 G EO

. W ASH

. L. R EV . 893, 916 (2004). An instructive appellate case is Hoctor v. United States Department of Agriculture , 82 F.3d 165 (7th Cir. 1996). As described in “A Guide to Federal Agency Rulemaking:”

The USDA had previously issued a valid legislative regulation after notice and comment, pursuant to the Animal Welfare Ac t, requiring that structures used for housing wild animals be of sufficient strength and sturdiness for their own protection and containment. Hoctor, a dealer in wild animals, had built a containment fence and a six-foot perimete r fence. The Department subsequently

issued an internal memorandum setti ng a minimum height requirement for perimeter fencing of eight feet and cited Hoctor for a violation. The court, per Judge Posner, held that the memorandum th at purported to interpret the regulation was legislative rather than interpretive, and therefore was i nvalid for lack of notice-and-comment procedure.

J EFFREY S. L UBBERS

, A G UIDE TO F EDERAL A GENCY R ULEMAKING 86 (4th ed. 2007).

The DHS guidance at issue here can fairly be ch aracterized as final and binding. The additional requirements in these guidance documents and on the FAQ webpage— which are relied upon by industry for compliance purposes at the direction of DHS— frequently add to or change how regulated entities interpret and apply the final ve rsion of Appendix A and, therefore, should have

been issued after notice-and-comment.

For example, DHS posted FAQ 1373, last modified on January 11, 2008, fifty-two days into the sixty-day Top-Screen submittal process, to address how to calculate release-flammable mixtures containing multiple COIs:

Q: If a mixture has multiple COIs as flamma ble release, does the facility need to list the entire weight of the mixture for each COI or does it only need to be listed once. Listing it multiple times would give the appearance that the facility has a lot more COIs than they actually do have.22 A: On behalf of the Chemical Security Compliance Division (CSCD), thank you for your question. The facility should dete rmine the percentage of each release

flammable COI that exists in the mixture at or above 1%. Then the facility should

select the release-flammable COI that exis ts in the highest pe rcentage and enter the entire weight of the mixture next to that release-flammable COI at the appropriate place on the Top-Scr een questionnaire. Thank you.

Based on this guidance, assume a facility has 1,000,000 pounds of gasoline, a nd butane exists in the gasoline in the highest concen tration. On its Top-Screen, the facility would indicate that it has 1,000,000 pounds of butane. Though this is pate ntly misleading, this is precisely the outcome that DHS required of the regulated community. 4

Page 34 of the December 2007 Top-Screen Use r’s Manual contradicts FAQ 1373 (emphasis added):

EXAMPLE (for fuels that contain Appendi x A COI): Gasoline typically includes Appendix A chemicals of inte rest. A facility that pos sesses gasoline need only

select “Fuel: Gasoline” and enter the to tal weight in pounds of gasoline at the facility. The facility should not select the constituents of its gasoline (e.g., butane) from the list of release-flammable COI in the Top-Screen.

Months later, on September 3, 2008, DHS added F AQ 1568, taking it verbatim from page 26 of the December 2007 Top-Screen User’s Manual:

Q: How does a facility count the amount of release-flammable mixture with an NFPA rating of 4 if it is stored in either below or above ground tank(s)?

A: Release-Flammable Mi xtures that are Fuels:

If a release-flammable chemical of interest is present in gasoline, diesel, kerosene or jet fuel (including fuels that have flammability hazard ratings of NFPA 1, 2, 3, or 4) stored in an aboveground tank farm, including tank farms that are part of pipeline systems, in a concentration equa l to or greater than one percent (1%) by weight of the mixture, the facility must indicate the type of fuel it possesses and [sic] provide the entire amount of the fuel.

If the same release-flammable chemical of in terest is present in a fuel stored in a concentration less than one percent (1%) by weight of the mixture, and the mixture has an NFPA flammability hazard rating of 1, 2, 3, or 4, the facility need not count

for the release-flammable COI or mixture.

4 Interestingly, DHS corrected this problem through upd ates to the Top-Screen questions, which now permit a facility to select the type of fuel stored onsite (e.g., gasoline) from a list and enter the total quantity of that fuel.23 This answer contradicts FAQ 1373, but DHS failed to amend, corr ect, or otherwise remove FAQ

1373. ILTA facilities that subm itted Top-Screens prior to th e September update—which is a majority, considering the Top-Screen submi ssion deadline was in January 2008—did not have the benefit of this guidance.

Maintaining the January 2008 and September 2008 responses on the FAQ website not only represents a contradiction but also creates functional confusion for those who use the FAQ webpage. A user who accesses the FAQ webpage for guidance on this question, but who only reads the January 2008 entry, would fail to get the benefit of the additional information contained in the September 2008 entry. While both are a ccessible on the FAQ, the January 2008 entry is presented first. It is unreasonable to expect a user to continue searching for additional guidance on this topic.

On January 8, 2008, DHS posted FAQ 1371 regarding whether a Top-Screen must be completed when the facility possesses only fuels that do not contain any release-flammable COIs:

Q: Do I need to complete a Top-Screen if I only possess fuels like diesel, jet fuel and kerosene that do not contain any Appe ndix A release-flammable chemicals of

interest?

A: No. A facility is required to submit a T op-Screen only if the facility has received

written notice from DHS under 6 CFR sec. 27.200 or if the facility actually possesses any chemical of in terest (COI) at or above the applicable Screening Threshold Quantity. However, if a facil ity is required to complete and submit a Top-Screen and possesses a release-flammable COI, then the Top-Screen will require information on the amount of diesel, jet fuel and kerosene at the facility even if those fuels do not contain any COI.

The exact same question is posed again in FAQ 1583, but the answer, posted on September 8, 2008, includes additional langua ge regarding gasoline:

Q: Do I need to complete a Top-Screen if I only possess fuels like diesel, jet fuel and kerosene that do not contain any A ppendix A release-flammable chemicals of

interest?

A: No. However, if a facility is requi red to complete and submit a Top-Screen because it possesses a release-flammable COI, then the facility also is required to provide the amount of diesel, jet fuel and/or kerosene at the facility, even if those fuels do not contain any COI. However, a facility that possesses gasoline that

contains a release-flammable COI stored in an above ground tank at or above 1% with a total weight of 10,000 pounds or more must select “gasoline” under “Fuels” and enter the total qua ntity at or above 10,000 pounds.

DHS has posted some FAQs twice. FAQ 1540, initially posted by DHS on July 15, 2008 was reposted as FAQ 1567 on September 3, 2008.24 Q: How does a facility c ount the amount of release flam mable COI in a mixture that is not a fuel with an NFPA rating of 1, 2, or 3?

A: If a release-flammable chemical of interest is present in a mixture in a concentration equal to or greater than one percent (1%) by wei ght of the mixture, and the mixture has an NFPA flammability hazard rating lower than 4 (i.e., NFPA hazard rating of 1, 2, OR 3), and it is not a fuel, the facility need not count the entire weight of the mixture toward the STQ. Mixtures with an NFPA flammability hazard rating of 1, 2 or 3 are calculated by multiplying the percentage of the COI times the total weight of the mixture to see if the COI is at or above the STQ. If a release-flammabl e COI is present in a mixture, and the concentration of the chemical is less [s ic] than one percent (1%) by weight, the facility need not count the COI or mixt ure in determining whether the facility possesses the STQ.

These confusing and contradictory FAQ’s and manual provisions, many worded as “requirements” despite never going through the requisite APA rulemaking process, demonstrate the problematic application of CFATS in the c ontext of release-flamma ble mixtures, generally, and gasoline, specifically.

3. DHS Failed to Consider Executive Order 13211

The final version of Appendix A indicates that “DHS prepared and placed in the docket a Regulatory Assessment addressing the economic impact of the IFR [which] is applicable to this final rule.” 72 Fed. Reg. 65,418. Because the final version of Appendix A significantly amends the IFR, the Regulatory Assessment should have b een amended as well, but DHS failed to do so.

Executive Order 13211, Actions Concerning Regulations T hat Significantly Affect Energy Supply, Distribution, or Use requires a “Statement of Ener gy Effects,” which is a detailed statement by the agency responsible for th e significant energy action relating to:

(i) any adverse effects on energy suppl y, distribution, or use (including a shortfall in supply, price increases, and increased us e of foreign supplies) should the proposal be implemented; and

(ii) reasonable alternatives to the action with adverse energy effects and the expected effects of such alternativ es on energy supply, distribution, and

use.

As illustrated by the following examples, agencies have included such required statements— even for regulations that have a far less di rect impact on energy compared to CFATS.

The Natural Resources Conservation Service (“ NRCS”) in the Department of Agriculture proposed to clarify “the appropr iate use of a program environm ental assessment (EA) and align25 its NEPA public involvement process with that of the Council on Environmental Quality’s (CEQ) regulations that impl ement the NEPA. 73 Fed. Reg. 35,883. The NRCS included a “Statement of Energy Effects” and concluded th at “this interim final does not constitute a significant energy action as define d in E.O. 13211.” 73 Fed. Reg. 35,884.

When EPA proposed a “national emission standard for hazardous air pollutants (NESHAP) for stationary combustion turbines,” EPA included a “Statement of Energy Effects” but determined that “the proposed rule when implemented will not have a significant adverse effect on the supply, distribution, or use of energy.” 68 Fed. Reg. 1,910.

Applying CFATS to aboveground gasoline storage te rminals, however, woul d have a significant energy impact. Nowhere has DHS fully considered the increased costs of distribution and the likely closure of multiple distribution terminals due to CFATS. Storage terminals are capitalintensive and operate on narrow pr ofit margins, and their operator s generally do not own the fuel they handle. The economics of th ese facilities typically center upon logistical operations that are service-based and independent from the high value of the commodities being handled.

PART IV. CONCLUSION

For the foregoing reasons, ILTA, on behalf of its affected members, petitions DHS to declare gasoline, as a mixture with an NFPA flammabi lity hazard rating of 3, exempt from the CFATS regulation.

Respectfully submitted,

Steven E. Roberts Roberts Law Group, PLLC

Practice Limited to Federal Law 700 Louisiana Street, Suite 2300 Houston, Texas 77002 Telephone: (713) 572-3600 Facsimile: (713) 572-3900

Attorney for Petitioner