[Federal Register Volume 62, Number 154 (Monday, August 11, 1997)]
[Notices]
[Pages 43024-43027]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-21155]


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DEPARTMENT OF TRANSPORTATION

Federal Railroad Administration
[FRA Docket No. SBR 97-1, Notice 1]
RIN NO. 2130--AB15


Interim Policy Statement Concerning Small Entities Subject to the 
Railroad Safety Laws

AGENCY: Department of Transportation (DOT), Federal Railroad 
Administration (FRA).

ACTION: Notice of interim statement of agency policy concerning small 
entities subject to the railroad safety laws.

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SUMMARY: In this notice, FRA explains its communication and enforcement 
policies and programs concerning small businesses subject to the 
federal railroad safety laws. These policies are being published 
pursuant to requirements set forth in the Small Business Regulatory 
Enforcement Fairness Act of 1996. FRA has in place programs that devote 
special attention to the unique concerns and operations of small 
entities in the administration of the national railroad safety 
compliance and enforcement program. FRA expects that publication of 
these policies and programs will enhance safe operations for small 
railroads, contractors, and shippers, and improve communication between 
FRA and small entities.

DATES: Effective Date: This Interim Statement of Policy is effective 
October 10, 1997.
    Written Comments: Written comments must be submitted to FRA before 
November 30, 1997.

FOR FURTHER INFORMATION PLEASE CONTACT:

    (1) Principal Program Person: Mark Weihofen, Office of Safety, 
Planning and Evaluation Staff Director, RRS-21, Federal Railroad 
Administration, 400 Seventh Street, SW, Stop 25, Washington, D.C., 
20590; telephone 202-632-3303.
    (2) Principal Attorney: Christine Beyer, Office of Chief Counsel, 
RCC-11, Federal Railroad Administration, 400 Seventh Street, SW, Stop 
10, Washington, D.C., 20590; telephone 202-632-6189.

SUPPLEMENTARY INFORMATION:

I. Legislative Background

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. No. 104-121) (SBREFA) establishes new requirements for federal 
agencies to follow with respect to small businesses, creates new duties 
for the Small Business Administration (SBA), and amends portions of the 
Regulatory Flexibility Act (5 U.S.C. 601, et seq.) and the Equal Access 
to Justice Act (EAJA) (5 U.S.C. 501, et seq.). The primary purposes of 
SBREFA are to implement recommendations developed at the 1995 White 
House Conference on Small Business, to provide small businesses 
enhanced opportunities for judicial review of final agency action, to 
encourage small business participation in the regulatory process, to 
develop accessible sources of information on regulatory requirements 
for small business, to create a cooperative regulatory environment for 
small business, and to make federal regulators accountable for 
``excessive'' enforcement actions.
    In order to accomplish these goals, SBREFA, among other things, 
requires federal enforcement agencies to institute two new policies. 
The first is a communication policy, described in section 213 of the 
legislation, in which each agency must ``answer inquiries by small 
entities concerning information on, and advice about, compliance with'' 
statutes and regulations within the agency's jurisdiction, 
``interpreting and applying the law to specific sets of facts supplied 
by the small entity.'' The second is an enforcement policy, required by 
section 223 of SBREFA, which requires each agency to establish a policy 
or program

to provide for the reduction, and under appropriate circumstances 
for the waiver, of civil penalties for violations of a statutory or 
regulatory requirement by a small entity. Under appropriate 
circumstances, an agency may consider ability to pay in determining 
assessments on small entities.

This enforcement policy must include conditions or exclusions, such as 
requiring a small entity to correct the violation within a reasonable 
time; excluding small businesses that have been subject to several 
enforcement actions by the agency; excluding actions that involve 
willful or criminal conduct; excluding actions that pose serious 
health, safety, or environmental threats; and requiring a good faith 
effort to comply with the law.
    SBREFA incorporates the definition for ``small entity'' that is 
established by existing law (5 U.S.C. 601, 15 U.S.C. 632, 13 CFR part 
121) for those businesses to be covered by the agency policies. 
Generally, a small entity is a business concern that is independently 
owned and operated, and is not dominant in its field of operation. 
Also, ``small governmental jurisdictions'' that serve populations of 
50,000 or less are small entities. (Commuter railroads are governmental 
jurisdictions, and some may fit within this statutory delineation

[[Page 43025]]

for small governmental jurisdictions, or small entities.) An agency may 
establish one or more other definitions for this term, in consultation 
with the SBA and after opportunity for public comment, that are 
appropriate to the agency's activities.

II. Definition of Small Entity in the Railroad Industry

    Pursuant to its statutory authority, the SBA promulgated 
regulations that clarify the term ``small entity'' by industry, using 
number of employees or annual income as criteria. 13 CFR 121.101-108, 
and 201. In the SBA regulations, main line railroads with 1500 or fewer 
employees, and switching or terminal establishments with 500 or fewer 
employees constitute small entities. The SBA regulations do not address 
hazardous material shippers in the railroad industry.
    Prior to the SBA regulations establishing size categories, the 
Interstate Commerce Commission (ICC) developed a classification system 
for freight railroads as Class I, II or III, based on annual operating 
revenue. (The detailed, qualifying criteria for these classifications 
are set forth in 49 CFR part 1201.) The Department of Transportation's 
Surface Transportation Board, which succeeded the ICC, has not changed 
these classifications. The ICC classification system has been used 
pervasively by FRA and the railroad industry to identify entities by 
size. The SBA recognizes this classification system as a sound one, and 
concurs with FRA's decision to continue using it, provided the public 
has notice of the classification system in use for any particular 
proceeding and an opportunity to comment on it. FRA has decided to 
define ``small entity,'' on an interim basis, to include only those 
entities whose revenues would bring them within the Class III 
definition. FRA believes this definition is a much more realistic and 
useful place to draw the line for safety purposes than the general SBA 
definition, but that several other possible definitions deserve 
consideration. Therefore, for purposes of the Interim Statement of 
Policy at this point in time, FRA wishes to clarify that small entities 
are: the Class III railroads; the hazardous material shippers that meet 
the income level established for Class III railroads (those with annual 
operating revenues of $20 million per year or less, as set forth in 49 
CFR 1201.1-1); railroad contractors that meet the income level 
established for Class III railroads; and commuter railroads or small 
governmental jurisdictions that serve populations of 50,000 or less. 
The principles concerning the aggregation of company affiliates set 
forth in DOT's regulations at 49 C.F.R. 6.7(f) apply to this definition 
for purposes of claims brought under EAJA. However, FRA intends to 
develop a new definition for the term ``small entity'' for the railroad 
industry that will apply to the programs set forth in this Policy 
Statement.
    Therefore, FRA now invites comment from the public on potential, 
alternative definitions for the term ``small entity.'' Suggested new 
definitions should be accompanied by supportable rationale, including 
economic and employee data, operating concerns, and an explanation of 
how SBREFA's legislative intent would be met by the adoption of a 
particular definition. The comments should also include how the 
proposed definition would apply to railroads, shippers, commuter 
railroads, and contractors working in the railroad industry.
    FRA is contemplating several potential new definitions at this 
time: fifteen employees subject to the hours of service laws, which was 
established by Congress as a benchmark for small business exemptions in 
the Hours of Service Act, 49 U.S.C. 20102, 21101-21107, 21303-4; 
400,000 person/hours worked annually, which equates to approximately 
200 employees and which FRA has used as a size classification in 
regulatory programs in the past; the Class III income designation 
currently in use; the employee delineations established by SBA 
regulation for main line and switching railroads; any combination of 
these; and entirely new designations. FRA invites comments from all 
individuals and entities subject to the railroad safety laws and other 
members of the public on these potential designations for ``small 
entity'' or any additional classifications that have not yet been 
discussed. After reviewing comments submitted, FRA will conduct a 
public meeting to further discuss and consider potential designations 
with all interested parties. Commenters should be aware that the 
``small entity'' definition FRA adopts here on an interim basis and the 
one it ultimately adopts will determine the entities that will be 
considered small for purposes of Regulatory Flexibility Act analysis, 
the Equal Access to Justice Act, and FRA's small business enforcement 
policy and communication program. However, whatever ``small entity'' 
definition FRA adopts, FRA will retain the authority to use different 
criteria to tailor the applicability of any regulations it issues to 
address appropriately the specific safety problem at issue. For 
example, even if FRA decides to retain the interim Class III standard 
for ``small entity,'' it may issue a rule that applies only to 
railroads with more than a certain number of annual person/hours or to 
all railroads, regardless of size.

III. FRA's Small Business Communication and Enforcement Programs

    FRA's purpose in publishing this notice and policy statement is to 
formally announce and explain its communication and enforcement 
policies concerning small entities in the railroad industry. FRA is 
hopeful that this publication will, aside from achieving compliance 
with the SBREFA requirements, enhance railroad safety in several ways: 
the number of small entities that participate cooperatively in the 
safety compliance and enforcement program will increase; small 
businesses will gain a greater understanding of railroad safety 
requirements; small entities will be encouraged to communicate more 
freely with agency personnel to alleviate potential safety risks before 
they become hazardous; and FRA's understanding of small operations will 
improve.
    FRA's small business communication program has existed for some 
time, and continues to grow to meet the needs of our customers in the 
railroad industry. FRA Office of Safety and Office of Chief Counsel 
personnel, at the headquarters, regional and local level, devote a 
great deal of attention to the inquiries and concerns of small 
entities. FRA's program is flexible and responsive to the particular 
need expressed. The agency's response takes a variety of forms: verbal 
and written answers to questions received, training sessions for new or 
existing small businesses on the substance of railroad safety 
regulations, and advice on a particular standard or interpretation of a 
standard. Some of the FRA Regional Administrators have established 
programs in which small entities in the region meet with FRA regional 
specialists on a regular basis to discuss new regulations, persistent 
safety concerns, developing technology, and ongoing compliance issues. 
FRA regional offices hold yearly conferences, in which specific blocks 
of time are set aside to meet with small businesses and hear their 
concerns. In addition, FRA has instituted new, innovative programs that 
expand our existing communication policy for small entities. The 
Railroad Safety Advisory Committee and Technical Resolution Committees, 
which play an integral role in the development of railroad safety 
regulations and the clarification of regulatory interpretations, 
include representatives of small businesses.

[[Page 43026]]

    Similarly, FRA's enforcement program devotes special attention to 
ensuring that the limited financial resources of small entities are 
considered during the enforcement process. FRA inspectors have and 
utilize discretion when determining whether a civil penalty citation or 
other enforcement action should be taken against a small entity. Staff 
attorneys in FRA's Office of Chief Counsel regularly assess information 
provided by a company concerning the degree to which fines will impact 
the viability of a small business, and the extent to which a fine may 
prevent the business from improving the safety of its operation. In 
fact, the federal railroad safety laws include the requirement that 
agency personnel consider a respondent's ability to pay in any civil 
penalty action taken. Staff attorneys regularly invite small entities 
to present information concerning financial status and other factors 
that may result in a reduction or waiver of penalty assessments. FRA 
has instituted a new enforcement program, the Safety Assurance and 
Compliance Program (SACP), that also benefits small entities, and it is 
described in more detail in the interim policy statement set forth 
below.
    FRA anticipates that when this interim policy statement becomes 
final, it will be codified in the Code of Federal Regulations as an 
appendix to 49 CFR part 209, so that all members of the public have 
access to it as needed. The terms ``small business'' and ``small 
entity'' have identical meaning for purposes of this document, and are 
used interchangeably throughout.

Comments Requested

    FRA invites written comment on the definition of ``small entity,'' 
potential alternative definitions, and supporting rationale for 
suggested alternative definitions. Please direct all written comments 
in triplicate to the Docket Clerk, FRA, 400 Seventh Street, SW, Stop 
10, Washington, D.C. 20590 before November 30, 1997.

Federal Railroad Administration Interim Statement of Agency Policy 
Concerning Small Entities

    This interim policy statement explains FRA's communication and 
enforcement policies concerning small entities subject to the federal 
railroad safety laws. These policies have been developed to take into 
account the unique concerns and operations of small businesses in the 
administration of the national railroad safety program, and will 
continue to evolve to meet the needs of our customers in the railroad 
industry. For purposes of this policy statement, Class III railroads, 
contractors and hazardous materials shippers meeting the economic 
criteria established for Class III railroads in 49 CFR 1201.1-1, and 
commuter railroads that serve populations of 50,000 or less constitute 
the class of organizations considered ``small entities'' or ``small 
businesses.''
    FRA understands that small entities in the railroad industry have 
significantly different characteristics than large carriers and 
shippers. FRA believes that these differences necessitate careful 
consideration in order to ensure that those entities receive 
appropriate treatment on compliance and enforcement matters, and 
enhance the safety of railroad operations. Therefore, FRA has developed 
programs to respond to compliance-related inquiries of small entities, 
and to ensure proper handling of civil penalty and other enforcement 
actions against small businesses.

Small Entity Communication Policy

    It is FRA's policy that all agency personnel respond in a timely 
and comprehensive fashion to the inquiries of small entities concerning 
rail safety statutes, safety regulations, and interpretations of these 
statutes and regulations. Also, FRA personnel provide guidance to small 
entities, as needed, in applying the law to specific facts and 
situations that arise in the course of railroad operations. These 
agency communications take many forms, and are tailored to meet the 
needs of the requesting party.
    FRA inspectors provide training on the requirements of all railroad 
safety statutes and regulations for new and existing small businesses 
upon request. Also, FRA inspectors often provide impromptu training 
sessions in the normal course of their inspection duties. FRA believes 
that this sort of preventive, rather than punitive, communication 
greatly enhances railroad safety. FRA's Office of Safety and Office of 
Chief Counsel regularly provide verbal and written responses to 
questions raised by small entities concerning the plain meaning of the 
railroad safety standards, statutory requirements, and interpretations 
of the law. As required by the Small Business Regulatory Enforcement 
and Fairness Act of 1996 (SBREFA), when FRA issues a final rule that 
has a significant impact on a substantial number of small entities, FRA 
will also issue a compliance guide for small entities concerning that 
rule.
    It is FRA's policy to maintain frequent and open communications 
with the national representatives of the primary small entity 
associations and to consult with these organizations before embarking 
on new policies that may impact the interests of small businesses. In 
some regions of the country where the concentration of small entities 
is particularly high, FRA Regional Administrators have established 
programs in which all small entities in the region meet with FRA 
regional specialists on a regular basis to discuss new regulations, 
persistent safety concerns, emerging technology, and compliance issues. 
Also, FRA regional offices hold periodic conferences, in which specific 
blocks of time are set aside to meet with small businesses and hear 
their concerns.
    In addition to these communication practices, FRA has recently 
instituted innovative partnership programs that expand the extent to 
which small entities participate in the development of policy and 
process. The Railroad Safety Advisory Committee (RSAC) has been 
established to advise the agency on the development and revision of 
railroad safety standards. The committee consists of a wide range of 
industry representatives, including organizations that represent the 
interests of small business. The small entity representative groups 
that sit on the RSAC may appoint members of their choice to participate 
in the development of new safety standards. This reflects FRA's policy 
that small business interests must be heard and considered in the 
development of new standards to ensure that FRA does not impose 
unnecessary economic burdens, and to create more effective standards. 
Similarly, FRA has established Technical Resolution Committees for each 
railroad safety discipline, which meet throughout the country to 
discuss, refine, and clarify compliance policies and interpretations of 
existing safety standards. These committees generally include small 
business representation and provide another avenue of communication 
between FRA and small entities. Finally, FRA has established a home 
page on the Internet and makes pertinent agency information available 
to the public in that medium. FRA's internet address is http://
www.fra.dot.gov and any particular FRA employee can be reached by 
entering the following: first name.last [email protected].
    FRA's longstanding policy of open communication with small entities 
is apparent in these practices. FRA will make every effort to develop 
new and equally responsive communication procedures as is warranted by 
new developments in the railroad industry.

[[Page 43027]]

Small Entity Enforcement Policy

    FRA has adopted an enforcement policy that addresses the unique 
nature of small entities in the imposition of civil penalties and 
resolution of those assessments. Pursuant to FRA's statutory authority 
and as described in 49 CFR part 209, Appendix A, it is FRA's policy to 
consider a variety of factors in determining whether to take 
enforcement action against persons, including small entities, who have 
violated the safety laws and regulations. In addition to the 
seriousness of the violation and the person's history of compliance, 
FRA inspectors consider ``such other factors as the immediate 
circumstances make relevant.'' In the context of violations by small 
entities, those factors include whether the violations were made in 
good faith (e.g., based on an honest misunderstanding of the law) and 
whether the small entity has moved quickly and thoroughly to remedy the 
violation(s). In general, the presence of both good faith and prompt 
remedial action militates against taking a civil penalty action, 
especially if the violations are isolated events. On the other hand, 
violations involving willful actions and/or posing serious health, 
safety, or environmental threats should ordinarily result in 
enforcement actions, regardless of the entity's size.
    Once FRA has assessed a civil penalty, it collects at least the 
statutory minimum amount ($250 for hazardous materials violations and 
$500 for all others) unless it must terminate the claim for some 
reason. However, civil penalties may be reduced from the initial 
assessment based on the consideration of a variety of criteria found in 
the railroad safety statutes and SBREFA: the severity of the safety, 
health or environmental risk presented; the existence of alternative 
methods of eliminating the safety hazard; the entity's culpability; the 
entity's compliance history; the entity's ability to pay the 
assessment; the impacts an assessment might exact on the entity's 
continued business; and evidence that the entity acted in good faith. 
FRA staff attorneys regularly invite small entities to present any 
information related to these factors, and reduce civil penalty 
assessments based on the value and integrity of the information 
presented. Staff attorneys conduct conference calls or meet with small 
entities to discuss pending violations, and explain the merits of any 
defenses or mitigating factors presented that may have resulted or 
failed to result in penalty reductions. Among the ``other factors'' FRA 
considers at this stage is the promptness and thoroughness of the 
entity's remedial action to correct the violations and prevent a 
recurrence. Small entities should be sure to address these factors in 
communications with FRA concerning civil penalty cases. Such long-term 
solutions to compliance problems will be given great weight in FRA's 
determinations of a final settlement offer.
    Finally, under FRA's Safety Assurance and Compliance Program 
(SACP), FRA identifies systemic safety hazards that continue to occur 
in a carrier or shipper operation, and in cooperation with the subject 
business, develops an improvement plan to eliminate those safety 
concerns. Typically, the plan provides small entities with a reasonable 
time frame in which to make improvements without the threat of civil 
penalty. If FRA determines that the entity has failed to comply with 
the improvement plan, however, enforcement action is initiated.
    FRA's small entity enforcement policy is flexible and 
comprehensive. FRA's first priority in its compliance and enforcement 
activities is public and employee safety. However, FRA is obtaining 
compliance and enhancing safety with reasoned, fair methods that do not 
inflict undue hardship on small entities.

    Submitted in Washington, DC, on August 6, 1997.
Donald M. Itzkoff,
Deputy Administrator.
[FR Doc. 97-21155 Filed 8-8-97; 8:45 am]
BILLING CODE 4910-06-P