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 Department of Homeland Security Transportation Security Administration 49 CFR Parts 1520 and 1580
[Docket No. TSA-2006-26514]
RIN 1652-AA51
 AGENCY: Transportation Security Administration, DHS.
 ACTION: Notice of proposed rulemaking.
 SUMMARY: This document places in the 
                        **Federal Register**
                         the entire Initial Regulatory Flexibility Analysis (IRFA) for this proposed rulemaking on rail transportation security, which has been available in the public docket. TSA published a Notice of Proposed Rulemaking (NPRM) on Rail Transportation Security and placed the IRFA in the public docket as part of the comprehensive Regulatory Impact Assessment, on December 28, 2006. However, TSA inadvertently omitted the summary of the IRFA from the NPRM when we published it in the 
                        **Federal Register**
                        . TSA decided to publish in the 
                        **Federal Register**
                         the same IRFA that has been in the docket.
 FOR FURTHER INFORMATION CONTACT: *For questions related to rail security:*
                         Lisa Pena, Transportation Sector Network Management, Freight Rail Security, TSA-28, Transportation Security Administration, 601 South 12th Street, Arlington, VA 22202-4220; telephone (571) 227-4414; facsimile (571) 227-1923; email 
                        *lisa.pena@dhs.gov*. *For legal questions:*
                         David H. Kasminoff, Office of Chief Counsel, TSA-2, Transportation Security Administration, 601 South 12th Street, Arlington, VA 22202-4220; telephone (571) 227-3583; facsimile (571) 227-1378; email 
                        *david.kasminoff@dhs.gov*.


SUPPLEMENTARY INFORMATION: Submitting Comments to the NPRM TSA invited comments to the NPRM that TSA published in the 
                    **Federal Register**
                     on December 21, 2006 (71 FR 76852); Docket No. TSA-2006-26514; RIN 1652-AA51. You may continue to submit comments to the NPRM until the comment period closes on February 20, 2007, using any one of the methods and the procedures identified in the NPRM. Availability of Rulemaking Document You can get an electronic copy using the Internet by (1) Searching the Department of Transportation's electronic Docket Management System (DMS) web page (
                    *http://dms.dot.gov/​search*); (2) Accessing the Government Printing Office's web page at 
                    *http://www.gpoaccess.gov/​fr/​index.html*; or (3) Visiting TSA's Security Regulations web page at 
                    *http://www.tsa.gov*
                     and accessing the link for “Research Center” at the top of the page. In addition, copies are available by writing or calling the individual in the 
                    **FOR FURTHER INFORMATION CONTACT**
                     section. Be sure to identify the docket number of this rulemaking. 
                    ( print page 7377) Background In accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), TSA prepared an Initial Regulatory Flexibility Analysis (IRFA) of the proposed rail transportation security rule. On December 28, 2006, TSA made the IRFA available in the public docket for this rulemaking as part of the comprehensive Regulatory Impact Assessment. However, TSA inadvertently omitted the summary of the IRFA when we published the NPRM in the 
                    **Federal Register**
                     on December 21, 2006 (71 FR 76852). To correct this oversight, TSA decided to publish in this document, the same IRFA, in its entirety, in the 
                    **Federal Register**
                    . No new information is being added to the analysis with this document, but TSA is providing an additional means for the public to see this information. Initial Regulatory Flexibility Analysis You may find the following IRFA, as reproduced below verbatim from the public docket for this rulemaking, in Section 7 of the Regulatory Impact Assessment, beginning on page 36. In this analysis, we note several abbreviations: (1) North American Classification System (NAICS); (2) Environmental Protection Agency's Risk Management Program (RMP); (3) Rail Security Coordinators (RSCs); and (4) Small Business Administration (SBA). You may view or download the IRFA directly from the public docket at   
                    *http://dmses.dot.gov/​docimages/​pdf99/​434562_​web.pdf*. 7. Initial Regulatory Flexibility Analysis In accordance with the Regulatory Flexibility Act (5 U.S.C. 601-612), TSA prepared this Initial Regulatory Flexibility Analysis (IRFA) that examines the impacts of the proposed rule on small entities (5 U.S.C. 601 
                    *et seq.*). A small entity may be: (1) A small business, defined as any independently owned and operated business not dominant in its field that qualifies as a small business per the Small Business Act (5 U.S.C. 632); (2) a small not-for-profit organization; or (3) a small governmental jurisdiction (locality with fewer than 50,000 people). This IRFA addresses the following: 1. The objectives of and legal basis for the proposed rule; 2. The reason the agency is considering this action; 3. The number and types of small entities to which the rule applies; 4. Projected reporting, recordkeeping, and other compliance requirements of the proposed rule, including the classes of small entities that will be subject to the requirements and the type of professional skills necessary for preparation of the reports and records; 5. Other relevant Federal rules that may duplicate, overlap, or conflict with the proposed rule; and 6. Significant alternatives to the component under consideration that accomplish the stated objectives of applicable statutes and may minimize any significant economic impact of the proposed rule on small entities. 7.1 Background and Legal Authority In response to the attacks on September 11, 2001, Congress passed the Aviation and Transportation Security Act (ATSA),[1]
                    
                     which established the Transportation Security Administration (TSA). TSA was created as an agency within the Department of Transportation (DOT), operating under the direction of the Under Secretary of Transportation for Security. On March 1, 2003, TSA was transferred to the Department of Homeland Security (DHS) and the officer formerly designated Under Secretary for Transportation Security, DOT, is now the Assistant Secretary, Transportation Security Administration (TSA), Department of Homeland Security (DHS). TSA has the responsibility for enhancing security in all modes of transportation. Under ATSA, and delegated authority from the Secretary of Homeland Security, TSA has broad responsibility and authority for “security in all modes of transportation * * * including security responsibilities” over modes of transportation that are exercised by the Department of Transportation.” [2]
                    
                     TSA has additional authorities as well. TSA is specifically empowered to develop policies, strategies, and plans for dealing with threats to transportation.[3]
                    
                     As part of its security mission, TSA is responsible for assessing intelligence and other information to identify individuals who pose a threat to transportation security and to coordinate countermeasures with other Federal agencies to address such threats.[4]
                    
                     TSA also is to enforce security-related regulations and requirements,[5]
                    
                     ensure the adequacy of security measures for the transportation of cargo,[6]
                    
                     oversee the implementation, and ensure the adequacy, of security measures at transportation facilities,[7]
                    
                     and carry out other appropriate duties relating to transportation security.[8]
                    
                     TSA has broad regulatory authority to achieve ATSA's objectives, and may issue, rescind, and revise such regulations as are necessary to carry out TSA functions,[9]
                    
                     and may issue regulations and security directives without notice or comment or prior approval of the Secretary of DHS.[10]
                    
                     TSA is also charged with serving as the primary liaison for transportation security to the intelligence and law enforcement communities.[11] TSA's authority with respect to transportation security is comprehensive and supported with specific powers related to the development and enforcement of regulations, security directives, security plans, and other requirements. Accordingly, under this authority, TSA may assess a security risk for any mode of transportation, develop security measures for dealing with that risk, and enforce compliance with those measures. TSA's legal authority is supported by National policy. On December 17, 2003, the President issued Homeland Security Presidential Directive 7 (HSPD-7, Critical Infrastructure Identification, Prioritization, and Protection), which “establishes a national policy for Federal departments and agencies to identify and prioritize United States critical infrastructure and key resources and to protect them from terrorist attacks.” [12]
                    
                     In recognition of the lead role assigned to DHS for transportation security, and consistent with the powers granted to TSA by ATSA, the directive provides that the roles and responsibilities of the Secretary of DHS include coordinating protection activities for “transportation systems, including mass transit, aviation, maritime, ground/surface, and rail and 
                    ( print page 7378)
                    pipeline systems.” [13]
                    
                     In furtherance of this coordination process, HSPD-7 provides that DHS and DOT will “collaborate on all matters relating to transportation security and transportation infrastructure protection.” [14]*See*, HSPD-7, Paragraph 22(h). In accordance with the September 2004 Memorandum of Understanding (MOU) between DHS and DOT, both Departments share responsibility for rail and hazardous materials transportation security. The two departments consult and coordinate on security-related rail and hazardous materials transportation requirements to ensure they are consistent with overall security policy goals and objectives and the regulated industry is not confronted with inconsistent security guidance or requirements promulgated by multiple agencies. 7.2 Statement of Need for the Proposed Action TSA developed the proposed rule to mitigate threats and vulnerabilities in the rail transportation network. In the United States, freight rail transportation systems transport hundreds of millions of dollars worth of freight and employ hundreds of thousands of individuals on an annual basis.[15]
                    
                     Furthermore, passenger systems, including passenger rail carriers as well as mass transit systems, carry millions of people daily throughout the country. Rail transportation networks “ both passenger and freight” are vulnerable to a variety of transportation security incidents. In the past, terrorists have targeted passenger rail transportation systems to inflict mass casualties (
                    *e.g.*
                     Tokyo 1995; Moscow 2000, 2001, and 2004; Madrid 2004; London 2005; and Mumbai 2006). When transporting certain materials, freight rail systems also represent potential terrorist targets. Although not the result of a deliberate attack, the incident involving a ruptured chlorine tank car in Graniteville, South Carolina, killed nine people and injured hundreds more. These incidents highlight the fact that hazardous materials in rail transportation and rail passenger systems are possible targets of terrorism intended to inflict hundreds or even thousands of fatalities, with direct and indirect costs from transportation system disruption that could total billions of dollars. The Notice of Proposed Rulemaking attempts to reduce the probability that such an event would occur by: (1) Requiring the protection of sensitive security information in the rail sector; (2) giving TSA authority to conduct inspections of rail security operations; (3) requiring the designation of Rail Security Coordinators; (4) requiring covered entities to have the ability to report on rail car locations; (5) requiring covered entities to report significant security concerns to TSA; and (6) requiring covered entities to establish a chain of custody and control standards for certain hazardous shipments. 7.3 Description and Estimated Number of Small Entities The regulated entities are divided into railroad carriers, transit systems, and rail hazmat facilities. Rail hazmat facilities are primarily chemical manufacturers although some wholesalers may also ship chemicals. In addition, some ammonia producers classify themselves as support activities for agriculture or agricultural wholesalers. Figure 1 provides the NAICS codes and SBA standards for defining small entities for the sectors expected to be affected by the rule. Figure 1.—Firm Size Standards
Industry
NAICS
Small business standardLine Haul railroads
482111
1,500 FTE.Short line railroads
482112
500 FTE.Transit Systems
485
$6.5 million.Petrochemical manufacturing
32511
1,000 FTE.Alkalis and chlorine manufacturing
325181
1,000 FTE.All other basic inorganics
325188
1,000 FTE.All other basic organics
325199
1,000 FTE.Plastic and resin manufacturing
32511
750 FTE.Nitrogen fertilizer manufacturing
325311
1,000 FTE.Other chemical manufacturing
325
500-1,000 FTE.Support activities for rail
48821
$6.5 million.Petroleum refineries
32411
1,500 FTE.Pulp and paper mills
3221
750 FTE.Support activities for agriculture
1151
$6.5 million.Chemical wholesalers
42469
100 FTE.Agricultural wholesalers
42491
100 FTE.Electric utilities
2111
<4 m megawatt hours/year.Water and sewage systems, private
2213
$6.5 million.Water and sewage systems, public
92
<50,000 people serviced.Source: Small Business Administration.
 Overall, of all the regulated parties, TSA identified 654 entities that may meet the SBA definition of small entity. The number of small rail carriers potentially affected by the rule is difficult to estimate accurately because most local rail carriers are privately owned. Based on AAR data on employment and revenues, TSA assumed that all rail carriers except the seven Class I railroads are small entities.[16]
                    
                     This assumption may be conservative because some private companies own a number of local railroads and may exceed the 500 FTE size limits. Figure 2 presents the AAR data on the number of railroads, average revenues, and average number of FTEs. 
 
 Figure 2.—Railroad Types by Average Revenue and Number of Employees
Type
Number
Average freight revenue
Average number of FTEsClass I
7
$5,590,000,000
21,100Regional
31
45,483,871
239Local
314
3,121,019
17Switching and Terminal
204
3,137,255
32Source: American Association of Railroads.
 BTS list 152 transit systems (21 commuter rail systems, 45 rail transit systems, 86 other rail transit systems).[17]
                    
                     Of these, 86 are listed as “other,” and include cable car, inclined plane, monorail, and automated guideway.[18]
                    
                     As shown in Figure 3, only the systems in the “other” category have average passenger revenues of less than $6.5 million, which is the SBA standard for small transit entities. The other transit systems not only have average passenger revenues that exceed the standard, but are generally also operated by governmental entities that receive support from federal and state governments. It is unlikely that local governments that meet the SBA standard for small governments (50,000 people served) operate rail transit systems. Consequently, TSA has included only the “other” entities as potentially affected small entities. Figure 3.—Transit Systems by Average Revenues
Type
Number
Average annual passenger revenueHeavy Rail
14
$189,590,000Light Rail
27
8,490,000Commuter Rail
21
73,910,000Other
86
590,000Source: BTS.
 Of the 241 rail hazmat facilities identified from the RMP data, there are 36 facilities that may be small entities (fewer than 500 employees for manufacturers or 100 for wholesalers and not obviously part of larger corporations). Of the 36 identified small entities, only a certain subset may incur costs for rail secure areas. As explained in Section 5.6.1, only facilities with a range of less than five to less than 21 employees are expected to incur incremental costs related to creating secure storage areas, while all would incur costs for the other requirements. Figure 4 presents the RMP data distribution by FTE for hazmat facilities that may be SBA-defined small entities. Of the total facilities assumed to be small, seven have 10 to 19 employees; 17 have 20-49 employees; six have 50-99 employees; and 6 have 100-499.[19] Figure 4.—Affected Small Rail Hazmat Facilities
Number of FTEs
Rail hazmat facilities100-499
650-99
620-49
1710-19
71-9
0Potential Small Entities
36Facilities with FTE > 499
205Total Rail Hazmat Facilities
241Source: TSA Calculations.
 7.4 Description of Compliance Requirements Railroads will have to submit the name(s) of and engage in training of the RSC, document chain of custody transfers, and file incident reports and car location reports as needed. TSA assumed that regional and local carriers handled hazmat shipments in proportion to their percentage of total freight carried. Again, this assumption may be conservative because it is likely that Class I carriers move most chemicals. Figure 5 presents the costs for an average regional, local, and S&T rail carrier to comply with the requirements. Figure 5.—Average Costs to Railroads by Size
Requirement
Unit cost
# Activities/year
Regional
Local
S & TRSC
$91
2
$182
$182
$182Incident Report
63
2
126
126
126( print page 7380)Chain of Custody
4,969,723
Weighted by % of Revenue
5,362
368
370Location
91
1
91
91
91Total


5,761
767
769Source: TSA Calculations.
 As discussed above, only the 86 transit systems in the “other” category in Figure 3 are expected to be small entities according to SBA standards.[20]
                    
                     These small transit systems will only incur unit costs for submission of RSC information and incident reporting. Both the RSC and incident reporting costs are expected to be incurred on average just once per year per small transit system, resulting in average costs per system of just $245, as shown in Figure 6. Figure 6.—Average Costs for Small Transit Systems
Requirement
Unit cost
# of Activities/year
RegionalA
B
A × BRSC
$91.00
2
$182Incident Report
63.00
1
63Total


245Source: TSA Calculations.
 As explained above, the cost for hazmat facilities includes the cost of adding fencing, training, and inspections, plus the types of cost incurred by railroads. TSA assumed that each facility will train 10 workers and the number of inspections per small facility is based on the assumption that the number of inspections is proportional to the quantity of chemical held. The 36 small rail hazmat facilities represent about 6.5 percent of the affected chemicals; therefore 6.5 percent of the inspections were divided among the 36 firms to estimate 384 inspections a year. Figure 7 presents the average costs for a hazmat facility. Because fencing is a capital cost, Figure 7 also presents the cost based on amortizing the fencing cost over 10 years at 7% discount rate.[21] Figure 7.—Average Costs for Small Rail Hazmat Facilities
Requirement
Unit cost
#
First-year cost
AnnualizedA
B
A × BSecure Storage Area
$16,150
1
$16,150
$2,299RSC
91
2
182
182Training
63
10
630
630Inspections
32
384
12,096
12,096Incident Report
63
1
63
63Chain of Custody
42,481
1
42,481
42,481Location Reporting
91
1
91
91Total


71,693
57,842Source: TSA Calculations.
 Figure 8 presents the average costs as a percent of average sales. As can be seen, some small entities categorized as chemical or agricultural wholesalers may incur costs that exceed one percent of annual sales. TSA requests comment on whether the rule will have a significant economic impact on a substantial number of small entities. 
                    ( print page 7381) Figure 8.—Average First-Year Compliance Costs as a Percent of Revenue
Type
Average first-year cost
Average 
                             revenue
Cost as a 
                             percent of  
                             revenue  
                             (percent)A
B
A/BRegional
$5,761
$45,483,871
0.01Local
767
3,121,019
0.02S & T
769
3,137,255
0.02Small Transit
245
590,000
0.04Chemical Manufacturer, 10-19 FTE
71,693
18,637,676
0.38Chemical Wholesaler, 10-19 FTE
71,693
6,184,695
1.16Agricultural Wholesaler, 10-19 FTE
71,693
6,062,925
1.18Source: TSA Calculations.
 7.5 Identification of Duplication, Overlap, and Conflict With Other Rules TSA has no knowledge of any duplicative, overlapping, or conflicting Federal rules. 7.6 Preliminary Conclusion Based on this preliminary analysis, TSA has not determined if the rulemaking would have a significant economic impact on a substantial number of small entities under section 605(b) of the RFA (5 U.S.C. 601 
                    *et seq.*). The agency requests comment on all aspects of this analysis. TSA will publish a Final Regulatory Flexibility Analysis for the Final Rule. Issued in Arlington, Virginia, on February 12, 2007. Mardi Ruth Thompson, Deputy Chief Counsel for Regulations.


# Footnotes

1.
    
                         Public Law 107-71, 115 Stat. 597 (November 19, 2001). Back to Citation
 2.
    
                         
                        *See*, 49 U.S.C. 114(d). The TSA Assistant Secretary's current authorities under ATSA have been delegated to him by the Secretary of Homeland Security. Under Section 403(2) of the Homeland Security Act (HSA) of 2002, Pub. L. 107-296, 116 Stat. 2315 (2002), all functions of TSA, including those of the Secretary of Transportation and the Undersecretary of Transportation of Security related to TSA, transferred to the Secretary of Homeland Security. Pursuant to DHS Delegation Number 7060.2, the Secretary delegated to the Assistant Secretary (then referred to as the Administrator of TSA), subject to the Secretary's guidance and control, the authority vested in the Secretary with respect to TSA, including that in Section 403(2) of the HSA. Back to Citation
 3.
    
                         49 U.S.C. 114(f)(3). Back to Citation
 4.
    
                         49 U.S.C. 114(f)(1)-(5); (h)(1)-(4). Back to Citation
 5.
    
                         49 U.S.C. 114(f)(7). Back to Citation
 6.
    
                         49 U.S.C. 114(f)(10). Back to Citation
 7.
    
                         49 U.S.C. 114(f)(11). Back to Citation
 8.
    
                         49 U.S.C. 114(f)(15). Back to Citation
 9.
    
                         49 U.S.C. 114(l)(1). Back to Citation
 10.
    
                         49 U.S.C. 114(l)(2). Back to Citation
 11.
    
                         49 U.S.C. 114(f) (1) and (5). Back to Citation
 12.
    
                         HSPD-7, Paragraph 1. Back to Citation
 13.
    
                         HSPD-7, Paragraph 15. Back to Citation
 14.
    
                         HSPD-7, Paragraph 22(h). Back to Citation
 15.
    
                         U.S. Department of Transportation, Research and Innovative Technology Administration, Bureau of Transportation Statistics, 
                        *Pocket Guide to Transportation 2006*
                         (Washington, D.C.: Bureau of Transportation Statistics, 2006). Back to Citation
 16.
    
                         Association of American Railroads, “
                        *Overview of U.S. Freight Railroads*,” January 2006. Back to Citation
 17.
    
                         Bureau of Transportation Statistics, National Transportation Statistics, Modal Profile Transit Systems, Updated April 2005. Note, however, that four of the 152 transit system listed by BTS are classified as trolley bus and would not be covered by this proposed rule. This is represented in Figure 22, which only shows 41 transit systems (14 heavy rail and 27 light rail). Back to Citation
 18.
    
                         The estimate for “Other Rail Transit Systems” impacted by the proposed rule shown in Figure 22 is conservative because it includes conveyances such as vanpool and aerial tramway, which would not be affected by this NPRM. Back to Citation
 19.
    
                         The number of facilities that actually are part of firms that meet the small entity definitions may be lower. TSA excluded only those facilities that could be clearly identified as belonging to corporations or municipalities that exceed the SBA standards. Back to Citation
 20.
    
                         Again, it is important to note that the estimate of 86 “Other Rail Transit Systems” impacted by the rule is in all likelihood conservative. Back to Citation
 21.
    
                         Note that calculations in Figure 23 may be off due to rounding. Back to Citation


[FR Doc. 07-715 Filed 2-13-07; 10:44 am] BILLING CODE 9110-05-P