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Proposed Rule

Rail Transportation Security

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Transportation Security Administration, DHS.


Notice of proposed rulemaking.


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.

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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

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

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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 (​search);

(2) Accessing the Government Printing Office's web page at​fr/​index.html; or

(3) Visiting TSA's Security Regulations web page at 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. Start Printed Page 7377


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​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 Start Printed Page 7378pipeline 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

IndustryNAICSSmall business standard
Line Haul railroads4821111,500 FTE.
Short line railroads482112500 FTE.
Transit Systems485$6.5 million.
Petrochemical manufacturing325111,000 FTE.
Alkalis and chlorine manufacturing3251811,000 FTE.
All other basic inorganics3251881,000 FTE.
All other basic organics3251991,000 FTE.
Plastic and resin manufacturing32511750 FTE.
Nitrogen fertilizer manufacturing3253111,000 FTE.
Other chemical manufacturing325500-1,000 FTE.
Support activities for rail48821$6.5 million.
Petroleum refineries324111,500 FTE.
Pulp and paper mills3221750 FTE.
Support activities for agriculture1151$6.5 million.
Chemical wholesalers42469100 FTE.
Agricultural wholesalers42491100 FTE.
Electric utilities2111<4 m megawatt hours/year.
Water and sewage systems, private2213$6.5 million.
Water and sewage systems, public92<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.

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Figure 2.—Railroad Types by Average Revenue and Number of Employees

TypeNumberAverage freight revenueAverage number of FTEs
Class I7$5,590,000,00021,100
Switching and Terminal2043,137,25532
Source: 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

TypeNumberAverage annual passenger revenue
Heavy Rail14$189,590,000
Light Rail278,490,000
Commuter Rail2173,910,000
Source: 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 FTEsRail hazmat facilities
Potential Small Entities36
Facilities with FTE > 499205
Total Rail Hazmat Facilities241
Source: 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

RequirementUnit cost# Activities/yearRegionalLocalS & T
Incident Report632126126126
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Chain of Custody4,969,723Weighted by % of Revenue5,362368370
Source: 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

RequirementUnit cost# of Activities/yearRegional
Incident Report63.00163
Source: 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

RequirementUnit cost#First-year costAnnualized
Secure Storage Area$16,1501$16,150$2,299
Incident Report6316363
Chain of Custody42,481142,48142,481
Location Reporting9119191
Source: 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. Start Printed Page 7381

Figure 8.—Average First-Year Compliance Costs as a Percent of Revenue

TypeAverage first-year costAverage revenueCost as a percent of revenue (percent)
S & T7693,137,2550.02
Small Transit245590,0000.04
Chemical Manufacturer, 10-19 FTE71,69318,637,6760.38
Chemical Wholesaler, 10-19 FTE71,6936,184,6951.16
Agricultural Wholesaler, 10-19 FTE71,6936,062,9251.18
Source: 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.

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Issued in Arlington, Virginia, on February 12, 2007.

Mardi Ruth Thompson,

Deputy Chief Counsel for Regulations.

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1.  Public Law 107-71, 115 Stat. 597 (November 19, 2001).

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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.

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4.  49 U.S.C. 114(f)(1)-(5); (h)(1)-(4).

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11.  49 U.S.C. 114(f) (1) and (5).

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12.  HSPD-7, Paragraph 1.

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13.  HSPD-7, Paragraph 15.

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14.  HSPD-7, Paragraph 22(h).

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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).

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16.  Association of American Railroads, “Overview of U.S. Freight Railroads,” January 2006.

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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).

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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.

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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.

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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.

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21.  Note that calculations in Figure 23 may be off due to rounding.

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[FR Doc. 07-715 Filed 2-13-07; 10:44 am]