PHMSA Proposes Regulations Claimed to Make

09 September 2014
Practice Groups:
Environmental, Land
and Natural
PHMSA Proposes Regulations Claimed to Make
Business Easier for Retailers and Transporters and
Finalizes a Regulation that Could Shut Down Small
By Barry M. Hartman, Edward J. Fishman, Cliff L. Rothenstein, Christine A. Jochim, and
Thomas R. DeCesar
The Pipeline and Hazardous Materials Safety Administration (PHMSA) recently published
two proposed regulations that may positively affect retailers and transporters, if implemented
as proposed. In addition, PHMSA finalized a rule giving it the power to shut down
businesses that miss payments on civil penalties.
Reverse Logistics—Comments due October 10, 2014
A Notice of Proposed Rulemaking (NPRM) published on August 11, 2014, proposes revising
PHMSA’s Hazardous Materials Regulations regarding the return shipment of certain
hazardous materials by motor vehicle. i In addition to establishing a definition for “reverse
logistics,” PHMSA proposes a new section in the regulations providing an exception for
materials that are transported as part of reverse logistics. The new section defines what
materials are eligible for the reverse-logistics exemption, and what packaging, hazard
communication, and training requirements apply to those shipments.
Currently, hazardous materials that must be shipped back to a distribution facility or
manufacturer are subject to the same packaging, communication, and training requirements
as the original shipment. However, PHMSA notes that “[i]n conducting enforcement actions
and outreach, we have learned that these requirements are often misunderstood or
overlooked.” ii
Under the proposed rule, “reverse logistics” would be defined as, “the process of moving
goods from their final destination for the purpose of capturing value, recall, replacement,
proper disposal, or similar reason.” Hazardous materials transported by motor vehicle that
would be eligible for the reverse-logistics exception include consumer products in hazard
classes 1.4 (ammunition), 2.1, 2.2, 3, 4.1, 5.1, 5.2, 6.1, 6.2, 8, and 9, within certain quantity
limitations. The proposed rule outlines modified packaging and training requirements for
eligible shipments.
The proposed rule also modifies the existing exception for lead acid batteries so that used
automobile batteries may be picked up from multiple retail locations for the purpose of
PHMSA expects that this regulatory change will reduce compliance costs for hazmat
shippers and carriers, but does not attempt to specifically quantify these figures, relying
instead on a range of estimated annual savings for training and shipment preparation.
Ultimately, the rule would reduce shipping paper preparation costs and packaging costs (due
PHMSA Proposes Regulations Claimed to Make Business
Easier for Retailers and Transporters and Finalizes a
Regulation that Could Shut Down Small Businesses
to the elimination of some shipping paper requirements and material-specific markings), and
placarding and training requirements (due to the elimination of placards on vehicles carrying
packages affected by this proposed rule, and lessened training requirements based on the
reduced level of risk posed by materials shipped in reverse logistics under this proposed
The reverse logistics proposal is available for public comment until October 10, 2014.
Special Permit and Approvals—Standard Operating Procedures—Comments
Due October 14, 2014
On August 12, 2014, PHMSA published an NPRM setting out the agency’s standard
operating procedures (SOPs) for addressing special permit and approval applications. iii
Special permits are variances from the hazardous material regulations granted by PHMSA.
An approval is written consent provided by the agency when prior consent for an activity is
required. Comments on the NPRM are due by October 14, 2014.
As an initial matter, PHMSA’s rulemaking explains that the only people with the authority to
issue special permits or approvals are PHMSA’s associate administrator, the associate
administrator’s designee, or anyone else otherwise designated in the Hazardous Material
Regulations. The proposed rule sets out PHMSA’s SOPs for addressing special permit and
approval applications. iv Reviews of special permit and approval applications are supposed
to be completed within 30 days; however, PHMSA may request additional information or
conduct an on-site review, which can extend the amount of time necessary for review. There
are four major steps in this process:
1. Completeness: PHMSA will determine if the applicant’s submission is complete.
If a submission is incomplete, it may be rejected, and the applicant will have to re-file.
2. Publication/Comment: If complete, PHMSA will publish special permit
applications in the Federal Register for public comment. The public has 30 days to
comment on new special permit applications. Approval applications are not
published in the Federal Register (although issued approvals are made available on
PHMSA’s website).
3. Evaluation: The evaluation phase is the most involved part of the application
process. This phase consists of two major assessment areas: a technical evaluation
and a fitness evaluation.
The technical evaluation reviews the details of the special permit/approval application
to ensure that the planned operation will provide a level of safety at least equal to
that specified under the Hazardous Material Regulations, or, if not specified, will
adequately protect the public.
The fitness evaluation focuses on the applicant’s history of hazardous material
incidents (including accidents, enforcement actions, and similar occurrences) over
the past four years. This fitness evaluation begins with an automated screening of
the applicant’s history of hazardous material incidents. If the automated screening
shows a significant history of such incidents, PHMSA will progress to a safety profile
review, in which a fitness coordinator will conduct an in-depth review of the
applicant’s fitness. If the fitness coordinator believes the applicant may be unfit,
PHMSA will conduct an on-site inspection of the applicant.
PHMSA Proposes Regulations Claimed to Make Business
Easier for Retailers and Transporters and Finalizes a
Regulation that Could Shut Down Small Businesses
In addition, as PHMSA advised in 2012, the agency does not conduct initial fitness
reviews in processing classification approvals of fireworks, explosives, organic
peroxides, and self-reactive materials. v PHMSA’s current proposed rule would codify
its 2012 guidance on this issue.
4. Disposition: After the evaluation process, PHMSA will either approve or deny the
application. If denied, PHMSA will provide a brief statement of reasons for the
PHMSA believes that the proposed rule will provide shippers and carriers with increased
clarity on PHMSA’s procedures, decrease delays in the special permit/approval process, and
reduce industry and agency costs. In addition, PHMSA determined that because it is only
incorporating its current SOPs as regulations, with amendments for clarity and efficiency, this
rulemaking will only have a minor impact on special permit or approval applicants. The
agency does not believe that small businesses will be affected by the proposed rule.
Failure to Pay Civil Penalties—Effective September 6, 2014
PHMSA, in consultation with the Federal Aviation Administration (FAA), Federal Motor
Carrier Safety Administration (FMCSA), and Federal Railroad Administration (FRA), issued a
final rule on August 7, 2014, granting these agencies authority to force businesses
conducting hazardous material operations to cease all such operations when they fail to pay
a civil penalty as ordered by an agency, or fail to make a scheduled payment under a
payment plan. vi The rule, which was originally proposed in September 2013,vii was effective
as of September 6, 2014, but does not apply retroactively to civil penalties due before that
date. It will be codified at 49 C.F.R. Part 109, Subpart E.
From a procedural standpoint, the rule provides that 45 days after the missed due date for a
civil penalty payment, or a scheduled payment in a payment plan, the agency may issue a
cessation of operations order (COO). The COO will provide that the delinquent party must
cease all business operations involving the transportation of hazardous materials on the 91st
day after the original due date for the payment, unless one of the following occurs: (1) full
payment of the civil penalty, (2) negotiation of a prepayment plan with the agency,
(3) providing proof of chapter 11 bankruptcy and inability to pay the penalty, or (4) obtaining
a stay from a federal court. The delinquent party has 20 days after the issuance of the COO
to file a petition for reconsideration. Failure to comply with a COO can lead to additional
penalties, including potential criminal action.
PHMSA determined that approximately 90% of the businesses affected by this rule would be
small businesses; however, PHMSA believes that the rule will not have a significant
economic impact on these small businesses, because no entity that complies with the
Hazardous Material Regulations will be affected. This reasoning, of course, misses the
point: the proper analysis should not focus on the rule’s effect on entities that are not subject
to the rule, but rather the impact on those that are— i.e., those that do not pay civil penalties
on time. In that regard, PHMSA noted that a minor economic impact is expected, because
PHMSA only refers about 10 companies a year for debt collection for failure to pay a civil
penalty. In reality, this rule gives these agencies significant leverage that could be brought
into play in negotiations between an agency and small businesses, and makes even the
smallest infraction accompanied by a penalty a potential business destroyer.
PHMSA Proposes Regulations Claimed to Make Business
Easier for Retailers and Transporters and Finalizes a
Regulation that Could Shut Down Small Businesses
Barry M. Hartman
[email protected]
Edward J. Fishman
[email protected]
Cliff L. Rothenstein
[email protected]
Christine A. Jochim
[email protected]
Thomas R. DeCesar
[email protected]
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79 Fed. Reg. 46,748 (Aug. 11, 2014).
Id. at 46,750.
79 Fed. Reg. 47,048 (Aug. 12, 2014).
Id. at 47,062-63.
See id. at 47,052, 47,062; Clarification Policy on Initial Fitness Review for Classification Approvals, 77 Fed.
Reg. 39,798 (July 5, 2012).
79 Fed. Reg. 46,194 (Aug. 7, 2014).
78 Fed. Reg. 58,501 (Sept. 24, 2013).