To: Frank Roskind & Nancy Lewis
Federal Railroad Administration
From: Anita Drummond
Policy Advocate
Date: March 6, 1997
Re: Review of Draft Initial Regulatory Flexibility Analysis for Track Safety Standard Proposed Rule
Thank you for providing the Office of Advocacy with an opportunity to review the draft text for Regulatory Flexibility Act (RFA) notice that will be placed in the Federal Register for the NPRM of the Track Safety Standard. In addition, I have reviewed briefly the regulatory analysis document. This involvement at the pre-proposed rule stage is helpful.
To confirm, the agency is not certifying this rule under RFA. (The agency would certify only if its economic and feasibility data concluded that the rule would not have a significant impact on a substantial number of small entities.) Accordingly, you have completed an analysis. The initial regulatory flexibility analysis (IRFA) or a summary of it must be placed in the Federal Register for public comment. The summary of the agency's preliminary conclusions about the impact of the proposed rule on small entities should be obvious on its face. The notice should state that the agency believes the rule may have a significant impact on a substantial number of small entities, and the agency is seeking comment on its preliminary conclusions contained in the initial regulatory flexibility analysis.
The draft text for the Federal Register does not provide an adequate description of the cost of the various compliance requirements of this rule on small entities. However, your draft analysis contains some of this information that should be summarized for the IRFA. More quantifiable data is needed in the IRFA. I would make the following preliminary recommendations regarding your summary:
* Briefly describe your outreach efforts to the short line railroads and how you have adjusted the rule to make it more flexible (e.g., a provision provides for voluntary certifications).;
* Provide a comprehensive quantifiable estimate of annual cost to the average firm and provide a comparison to average annual revenue or profits (avoid relying on small aggregate costs because they can hide large impacts in specific sectors);
* Discuss the provisions that will have the most impact and what that impact is expected to be (how much will it cost the average firm, what particular types of operations are affected, what size of firm is particularly burdened, e.g., firms with less than $10 million in revenue);
* Discuss the provisions where the agency needs more cost information;
* List the provisions that will have little impact and why (e.g., 90% of the industry is already in compliance, the agency is providing flexible compliance provisions, etc.);
* Provide a description of any significant alternatives to the proposed rule (not those contained within it) which may accomplish the same goals and solicit public comment on them (you may rely on the advisory committee meeting minutes to provide alternatives that were rejected by the committee but still possibly viable).
From the analysis provided, we presume that the Federal Railroad Administration is using the Small Business Administration's definition of small railroad, as required by § 601 of the RFA. If this is not the case, the agency is required to consult with the Office of Advocacy and publish a notice for public comment on an alternative definition within the NPRM.
For RFA purposes, information about the potential benefits associated with the rule or particular provisions is useful. However, costs cannot be dismissed simply by weighing them against projected benefits. Also, aggregate costs are not useful to a single firm trying to assess the costs to its own operations. The agency should explicitly estimate the cost for firms within various size categories (e.g., different revenue or employment ranges).
Under the advisory committee process, the agency is still obligated to complete a RFA analysis and develop flexible alternatives for consideration. It is often overlooked in the rulemaking process that the proposed rule is just that-proposed. The agency should not preclude recommendations or alternatives presented or supported during the comment period if they meet the objectives of the rule, assuming those objectives are well-founded. It should be noted that valid alternatives may be presented if specific regulatory objectives are questioned by the public during the comment period.
The Federal Railroad Administration recently expressed interest in working with the Office of Advocacy on Regulatory Flexibility Act compliance, and I feel this exercise was constructive. The agency has completed a draft analysis. Advocacy would recommend expounding upon the quantifiable data and effectively communicating the findings to the small business community in the summary IRFA. In addition, a more extensive list of alternatives to the proposed rule needs to be developed and included in the IRFA.
For your information, correspondence from the Office of Advocacy may be submitted into the public record. In addition, the Office of Advocacy will review the published proposed rule and may submit comments on its substance, as well as the accompanying RFA analysis, during the public comment period. Please contact me if you have any questions about this memorandum or the RFA at (202) 205-6533.