[Federal Register Volume 84, Number 151 (Tuesday, August 6, 2019)]
[Proposed Rules]
[Pages 38180-38198]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16677]
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DEPARTMENT OF TRANSPORTATION
Pipeline and Hazardous Materials Safety Administration
49 CFR Part 180
[Docket No. PHMSA-2017-0083 (HM-219B)]
RIN 2137-AF30
Hazardous Materials: Response to an Industry Petition To Reduce
Regulatory Burden for Cylinder Requalification Requirements
AGENCY: Pipeline and Hazardous Materials Safety Administration (PHMSA),
Department of Transportation (DOT).
ACTION: Notice of proposed rulemaking (NPRM).
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SUMMARY: PHMSA is proposing to revise requirements on the
requalification period for certain DOT 4-series specification cylinders
in non-corrosive gas service in response to a petition for rulemaking
submitted by the National Propane Gas Association. This rulemaking
proposes regulatory relief and a reduction in the requalification-
related costs for propane marketers, distributors, and others in non-
corrosive gas service.
DATES: Comments must be received by October 7, 2019. To the extent
possible, PHMSA will consider late-filed comments as a final rule is
developed.
ADDRESSES: You may submit comments identified by the Docket Number
PHMSA-2017-0083 (HM-219B) by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Fax: 1-202-493-2251.
Mail: Docket Management System; U.S. Department of
Transportation, West Building, Ground Floor, Room W12-140, Routing
Symbol M-30, 1200 New Jersey Avenue SE, Washington, DC 20590.
Hand Delivery: To the Docket Management System; Room W12-
140 on the ground floor of the West Building, 1200 New Jersey Avenue
SE, Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through
Friday, except Federal holidays.
Instructions: All submissions must include the agency name and
Docket Number (PHMSA-2017-0083) or RIN (2137-AF30) for this rulemaking
at the beginning of the comment. To avoid duplication, please use only
one of these four methods. All comments received will be posted without
change to the Federal Docket Management System (FDMS) and will include
any personal information you provide.
Docket: For access to the dockets to read background documents or
comments received, go to http://www.regulations.gov or DOT's Docket
Operations Office (see ADDRESSES).
Privacy Act: In accordance with 5 U.S.C. 553(c), DOT solicits
comments from the public to better inform its rulemaking process. DOT
posts these comments, without edit, including any personal information
the commenter provides, to http://www.regulations.gov, as described in
the system of records notice (DOT/ALL-14 FDMS), which can be reviewed
at http://www.dot.gov/privacy.
FOR FURTHER INFORMATION CONTACT: Shelby Geller, Standards and
Rulemaking Division, (202) 366-8553, Pipeline and Hazardous Materials
Safety Administration, U.S. Department of Transportation, 1200 New
Jersey Avenue SE, Washington, DC 20590-0001.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. History
B. Petition P-1696
C. Statement of Enforcement Discretion
II. Overview
III. Regulatory Analyses and Notices
A. Statutory/Legal Authority for This Rulemaking
[[Page 38181]]
B. Executive Order 12866 and DOT Regulatory Policies and
Procedures
C. Executive Order 13771
D. Executive Order 13132
E. Executive Order 13175
F. Regulatory Flexibility Act, Executive Order 13272, and DOT
Policies and Procedures
G. Paperwork Reduction Act
H. Regulation Identifier Number (RIN)
I. Unfunded Mandates Reform Act
J. Environmental Assessment
K. Privacy Act
L. Executive Order 13609 and International Trade Analysis
M. National Technology Transfer and Advancement Act
N. Executive Order 13211
List of Subjects
I. Background
A. History
On January 30, 2015, PHMSA published a notice of proposed
rulemaking (NPRM) titled ``Hazardous Materials: Adoption of Special
Permits (MAP-21) (RRR)'' [Docket No. PHMSA-2013-0042 (HM-233F); 80 FR
5339]. The HM-233F NPRM proposed to adopt provisions contained in 98
widely-used or longstanding special permits with an established safety
record. Following a 60-day comment period, PHMSA published a final rule
on January 21, 2016, that adopted the provisions of 96 of these special
permits [81 FR 3635]. The HM-233F final rule became effective on
February 22, 2016.
The HM-233F final rule amended Sec. 180.209(e), which details
conditions for allowing the requalification period to be longer for DOT
4-series specification cylinders in certain hazardous material service.
Prior to publication of the final rule, Sec. 180.209(e) authorized DOT
4B, 4BW, 4BA, or 4E cylinders used exclusively for a specified list of
hazardous materials (non-corrosive gases) to be requalified by
volumetric expansion every 12 years, instead of every 5 years.
Alternatively, these cylinders were authorized to be requalified by the
proof pressure test method every 7 years after the first 12-year
period. A proof pressure test is a pressurization test without the
determination of a cylinder's expansion, and a volumetric expansion
test determines the total and permanent expansion of a cylinder at a
given pressure and is conducted by either water jacket or direct
expansion test, both of which are conducted with water (see Sec.
180.203).
In the HM-233F NPRM, PHMSA proposed to adopt the provisions of
special permit 12084, which was issued to Honeywell International,
Inc.\1\ This special permit authorized the requalification of DOT 4B,
4BA, or 4BW cylinders in accordance with Sec. 180.209(e) for 11
additional non-corrosive gases. PHMSA identified this special permit as
suitable for adoption into the regulations. In the HM-233F NPRM, PHMSA
proposed to revise Sec. 180.209(e) by replacing the list of specific
hazardous materials with broader applicability to non-corrosive gases
commercially free from corroding components.
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\1\ https://www.phmsa.dot.gov/approvals-and-permits/hazmat/file-serve/offer/SP12084.pdf/offerserver/SP12084.
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PHMSA also proposed to amend the requalification periods of
authorized cylinders for both the volumetric expansion and proof
pressure tests in Sec. 180.209(e). Specifically, PHMSA proposed to
standardize the requalification period to 10 years for both the
volumetric expansion test (previously a 12-year period) and the proof
pressure test (previously a 7-year period after an initial 12-year
period). While this proposed change was not discussed in the preamble
of the HM-233F NPRM, PHMSA did propose amended regulatory text. PHMSA
received no adverse comments to any of the proposed changes to Sec.
180.209(e)--the adoption of special permit 12084 and 10-year
requalification period--and therefore adopted the language as proposed
in the final rule. While the effective date of the final rule was
February 22, 2016, PHMSA allowed for delayed compliance to begin on
January 23, 2017.
B. Petition P-1696
On January 13, 2017, the National Propane Gas Association (NPGA)
submitted a petition to PHMSA and the Office of the Secretary of
Transportation (OST) titled ``Petition for Rulemaking and Emergency
Stay Cylinder Requalification Requirements'' [PHMSA-2017-0019 (P-1696)
\2\]. NPGA requested that PHMSA revise the initial timeframe before
requalification, revise the requalification period for both the
volumetric expansion and proof pressure tests in Sec. 180.209(e) to
those authorized prior to the HM-233F final rule, and update the table
in Sec. 180.209(a) accordingly. NPGA also requested a Statement of
Enforcement Discretion while the rulemaking action was pending.
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\2\ See P-1696: https://www.regulations.gov/docket?D=PHMSA-2017-0019.
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In the petition, NPGA advised PHMSA and OST that the HM-233F
rulemaking created potential impacts and unanticipated costs.
Specifically, NPGA asserted that the regulatory change to the
requalification period created confusion in the propane industry
because it was unclear whether those cylinders manufactured or
requalified by the volumetric expansion test within the last 10 to 12
years had to be immediately requalified, since prior to the final rule
they would not have required requalification until the 12-year date.
Furthermore, NPGA stated that the requirement to test cylinders
following manufacture or volumetric expansion testing more frequently
(i.e., every 10 years instead of every 12 years) would increase
qualification and training costs. NPGA explained that current industry
practice \3\ is to mark newly manufactured cylinders, eligible for
requalification in accordance with Sec. 180.209(e), with a 12-year
requalification mark. Even though this marking is not required by the
Hazardous Materials Regulations (HMR; 49 CFR parts 171-180), industry
would have to train employees to ignore those markings. Additional
training would be required on the revised requalification periods for
both volumetric expansion and proof pressure testing.
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\3\ This is voluntary industry practice and not required by the
HMR.
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On March 2, 2017, PHMSA met with NPGA representatives to: (1)
Better understand NPGA's concerns; (2) identify existing industry
practice and request data to assess the impact of the revised cylinder
requalification periods; and (3) evaluate the merits of a rulemaking
and Statement of Enforcement Discretion. During this meeting, NPGA
reiterated their petition, in that the change in requalification
intervals would impose unanticipated industry costs. Furthermore, NPGA
conveyed that a majority of their associate members requalify certain
DOT 4-series specification cylinders by volumetric expansion testing.
Following these discussions, PHMSA accepted NPGA's petition for
rulemaking.
C. Statement of Enforcement Discretion
On March 17, 2017, PHMSA issued a Statement of Enforcement
Discretion stating that it will not take enforcement action against a
person who requalifies DOT 4-series specification cylinders using
volumetric expansion testing pursuant to a 12-year requalification
period while it reviews NPGA's petition for rulemaking.\4\ This
Statement of
[[Page 38182]]
Enforcement Discretion specified that until further action, DOT 4-
series specification cylinders requalified by volumetric expansion in
accordance with Sec. 180.209(e) may have a 10- or 12-year
requalification period without any enforcement action taken.
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\4\ Pipeline and Hazardous Materials Safety Administration's
Notice Regarding the Requalification Period for Department of
Transportation (DOT) Specification Cylinders, issued May 17, 2017,
available at: https://www.regulations.gov/document?D=PHMSA-2017-0083-0001.
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II. Overview
PHMSA has reviewed NPGA's petition for rulemaking and agrees that
it merits a rulemaking to consider revising the Sec. 180.209(e)
requalification period, as accepting the petition is expected to reduce
regulatory burden and industry cost. PHMSA does not anticipate that
this revision poses any increased safety risk, as historically these
cylinders were authorized to be requalified on a 12-year cycle for
volumetric expansion testing and on a 7-year cycle (after an initial
12-year period) for proof pressure testing with no known incidents
attributable to the requalification timeframe. It should be noted that
in accordance with Sec. 180.205(c), even if a cylinder is due for
requalification, it may be used until emptied, as long as it was filled
prior to the requalification due date. Once emptied and placed into
transportation, it must be requalified in accordance with the
appropriate test method before being refilled.
In this NPRM, PHMSA is proposing to return the initial and
subsequent requalification periods to 12 years for volumetric expansion
tests, as proposed in the NPGA petition and authorized prior to HM-
233F. PHMSA is proposing to also return the initial requalification
period for proof pressure testing to 12 years, but maintain the 10-year
period for subsequent proof pressure requalification testing as adopted
in HM-233F final rule. The proof pressure test requalification period
of 10 years was not proposed in NPGA's petition for rulemaking
(proposed as 7 years). We acknowledge that the proposed 10-year
requalification period will likely result in one-time industry training
costs; however, the allowance to requalify a cylinder by proof pressure
test every 10-years, instead of every 7 years, after the initial 12-
year requalification period, may outweigh the costs of training because
of less frequent cylinder requalification. Thus, PHMSA believes that
this could allow for the greatest regulatory relief. PHMSA invites
comments on the potential for costs or savings that may result from
maintaining a 10-year requalification period following the initial 12-
year requalification period for proof pressure testing instead of
returning to the 7-year cycle, after the initial 12-year period (as
proposed by the NPGA in its petition and reflective of the
requalification period prior to publication of the HM-233F final rule).
Additionally, PHMSA is proposing to revise the title of Sec.
180.209(e) to more appropriately reflect the regulatory provisions in
this paragraph. PHMSA is also proposing to revise the table in Sec.
180.209(a) to properly reflect the baseline requalification period and
the alternate requalification period allowances for various DOT
specification cylinders. The baseline for DOT 4B, 4BA, 4BW, and 4E
cylinder requalification is 5-years, but in accordance with the
proposed language of Sec. 180.209(e), these cylinders may be
requalified every 10 or 12 years, under the specified conditions and
dependent on the type of pressure test performed. In addition, PHMSA
proposes to add a ``7'' to the Sec. 180.209(a) table for DOT 4B, 4BA,
or 4BW cylinders, as they are authorized for requalification every 7 or
12 years, instead of 5 years, when used as a fire extinguisher in
accordance with Sec. 180.209(j). There is no substantive change in
adding ``7'' to the table as this is a conforming amendment for
consistency between the table in paragraph (a) and the provisions in
paragraph (j), which was inadvertently deleted in the HM-233F final
rule.
PHMSA is also proposing to amend the table in Sec. 180.209(a) to
remove any reference to paragraph (e) for DOT 3A, 3AA, 3AL, 3AX, 3AAX,
3B, 3BN, and 4AA480 cylinders. Section 180.209(e) does not authorize
requalification of these cylinder types. Therefore, this NPRM adjusts
for any requalification period that is not currently authorized.
Further, PHMSA is proposing to make editorial corrections to the
table for consistency. We propose to: Delete ``DOT'' preceding 3, 3A,
3AA, 3AL, 3AX, 3AAX, and 4E cylinders because the other entries do not
have a similar qualifier; specify ``service pressure'' in the ``Minimum
test pressure (psig)'' column for DOT 4D, 4DA, and 4DS cylinders to
match other entries; and remove a duplicative citation of Sec. 180.209
for DOT 3AL cylinders to be consistent with the other requalification
period references.
III. Regulatory Analyses and Notices
A. Statutory/Legal Authority for This Rulemaking
This rulemaking is published under the authority of Federal
Hazardous Materials Transportation Law (Federal hazmat law; 49 U.S.C.
5101 et seq.), which authorizes the Secretary of Transportation to
``prescribe regulations for the safe transportation, including
security, of hazardous materials in intrastate, interstate, and foreign
commerce.'' The Secretary's authority is delegated to PHMSA at 49 CFR
1.97. This rulemaking proposes to amend the requalification periods for
certain DOT 4-series specification cylinders under relief provided in
Sec. 180.209(e) and to revise the requalification table in Sec.
180.209(a) accordingly.
B. Executive Order 12866 and DOT Regulatory Policies and Procedures
This rulemaking is considered a nonsignificant regulatory action
under section 3(f) of Executive Order 12866 (``Regulatory Planning and
Review'') and was not reviewed by the Office of Management and Budget
(OMB). This rulemaking is also considered a nonsignificant rulemaking
under the DOT's Policies and Procedures for Rulemakings [DOT Order
2100.6; December 20, 2018].
Executive Order 12866 (``Regulatory Planning and Review'') \5\
requires agencies to regulate in the ``most cost-effective manner,'' to
make a ``reasoned determination that the benefits of the intended
regulation justify its costs,'' and to develop regulations that
``impose the least burden on society.''
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\5\ See 58 FR 51735, October 4, 1993 for Executive Order 12866
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Additionally, Executive Order 12866 requires agencies to provide a
meaningful opportunity for public participation, which also reinforces
requirements for notice and comment under the Administrative Procedure
Act (APA).\6\ Therefore, PHMSA solicits comment on the revised
requalification periods for DOT 4-series specification cylinders as
proposed in Sec. 180.209(e). PHMSA also seeks comment on the
preliminary cost and cost savings analyses, including industry costs or
cost savings due to the revised requalification periods for volumetric
expansion and proof pressure testing.
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\6\ See 5 U.S.C. 553.
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Overall, this rulemaking maintains the continued safe
transportation of hazardous materials while producing a net cost
savings. PHMSA's findings are summarized here and described in further
detail in the following 13 sections, which together comprise our
preliminary analysis for this NPRM:
1. Summary of preliminary findings
2. Description of the need for the regulatory action
3. Definition of the baseline and rulemaking scenarios
4. The time horizon of analysis
5. Description of the type and number of affected cylinders
6. Description of the type and number of affected entities
[[Page 38183]]
7. Analysis of requalification cost savings
8. Analysis of training costs and cost savings
9. Analysis of total net cost savings
10. Evaluation of non-quantified and non-monetized impacts
11. Characterization of additional uncertainty in impacts, including
estimated costs, cost savings, and net cost savings
12. Supplemental analysis regarding the number of affected cylinders
13. Supplemental analysis regarding possible effects on proof pressure-
tested cylinders
Summary of Preliminary Findings
PHMSA's preliminary analysis finds that the proposed changes would
result in total net cost savings of approximately $142.4 million over
10 years, or $20.3 million annualized, when discounted at 7 percent.
These cost savings are almost entirely based on two effects. The
first effect is avoiding the immediate, accelerated requalification of
approximately 5 million DOT 4-series specification cylinders that would
otherwise be required if the proposed changes of this rulemaking are
not adopted. The second effect is an anticipated reduction in the
number of cylinders in need of requalification in any given year. The
avoidance of accelerated requalification occurs in year one, and the
``enduring'' effect of reducing the number of cylinders in need of
requalification occurs in subsequent years (years 2-10). Our primary
analysis focuses on cost savings to entities that requalify cylinders
by volumetric expansion testing. However, this NPRM also proposes to
retain the 10-year requalification period for the proof pressure test
adopted under the HM-233F final rule, so we assume cylinder marketers
require some training to ensure knowledge of the revised
requalification timeframes for proof pressure testing. This NPRM would
also relieve cylinder manufacturers of training to ensure that
voluntary stamping practices align with the initial requalification
timeframe, resulting in training-related cost savings for cylinder
manufacturers. On net, we estimate training cost savings at
approximately $0.2 million. We add the two types of requalification
cost savings to the net cost savings related to training to determine
the total net cost savings. See Exhibit 1.
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\7\ Due to rounding, these estimates and findings may differ
slightly from those expressed elsewhere in this analysis. Net cost
savings is defined as cost savings minus costs, but in Exhibit 1, it
is presented equivalently as the sum of (net) cost savings. Year-one
effects are undiscounted. Effects related to years two through ten
are discounted at 7%. Total effects, covering the 10-year time
period of analysis, include an undiscounted, year-one value, which
is added to values discounted at 7% for years two through ten.
Exhibit 1--Summary of Estimates and Findings \7\
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Number of Cylinders Affected in Year 1..... 5 million.
Annual Number of Cylinders Affected in 500,000.
Years 2-10.
Requalification Cost Savings in Year 1..... $86.1 million.
Requalification Cost Savings per Cylinder $17.22.
(weighted average).
Training Net Cost Savings in Year 1........ $0.2 million.
Requalification Cost Savings in Years 2-10 $56.1 million.
(7%).
Total Net Cost Savings (7%)................ $142.4 million.
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Exhibit 1 shows ``year one,'' monetized cost savings as well as
``enduring'' cost savings in years 2-10 based on a reduction in the
number of cylinders in need of requalification. Please see the section,
``Analysis of total net cost savings,'' for additional tabulation of
the total net cost savings of the rule, discounted over 10 years.
If one were to present these cost savings on an indefinite or
perpetual time horizon, their net present value would be approximately
$209.3 million at a 7% discount rate, and their annualized value would
be $14.7 million, also at a 7% discount rate.\8\ Please note, to arrive
at this calculation, year-one impacts are undiscounted because these
impacts are expected to begin occurring soon after the rulemaking is
made effective, if it is made effective. On a perpetual horizon, the
year-one savings is $86,338,066 and subsequently, all other years
repeat a savings of $8,610,338.
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\8\ The perpetual, annualized cost savings were calculated by
discounting the net present value of cost savings ($209,342,894.57)
by one year using a 7% discount rate. This is equivalent to
multiplying the net present value of cost savings by 0.07.
$209,342,894.57 * 0.07 = $14,654,002.62.
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Description of the Need for Regulatory Action
NPGA petitioned \9\ PHMSA to amend Sec. 180.209(e) because the HM-
233F final rule was expected to impose a substantial cost burden on
industry. Specifically, NPGA reasoned that, due to confusion about the
applicability of the HMR, the requirements in the HM-233F final rule
would accelerate the requalification of certain DOT 4-series
specification cylinders by 2 years, even though the HMR allows a
cylinder filled before the end of the requalification period to remain
in service until emptied, as long as it is requalified prior to being
refilled and offered back into transportation (see Sec. 180.205(c)).
For example, a cylinder tested by volumetric expansion would need to be
requalified every 10 years, rather than every 12 years. This 2-year
acceleration would effectively force 3 years of cylinder vintages to be
requalified in a single year, and thus would have a potential one-time
impact on thousands of propane marketers and millions of cylinders. To
avoid this substantial cost burden, PHMSA issued a Statement of
Enforcement Discretion on March 17, 2017, and initiated this
rulemaking, which proposes to allow affected cylinders to be initially
and subsequently requalified over a 12-year period when tested by
volumetric expansion.
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\9\ See P-1696: https://www.regulations.gov/docket?D=PHMSA-2017-0019.
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NPGA also cited confusion stemming from the industry practice of
stamping a propane cylinder at the time of manufacture with an
indication that the cylinder must be requalified 12 years after the
manufacture date. The HMR do not require this stamp. However, this
practice means that under current requirements, retraining would be
necessary to educate employees on the 10-year requalification period
and to ignore the stamp marking.
Further, PHMSA proposes to retain the 10-year period for proof
pressure testing requalification, after the initial requalification
test at 12 years. Prior to publication of the HM-233F final rule, the
HMR required a 7-year timeframe for subsequent requalification by proof
pressure. In its petition, NPGA asked that PHMSA return the proof
pressure
[[Page 38184]]
test requalification periods of paragraph (e) to 7 years. However,
PHMSA is proposing to maintain the 10-year requirement on the basis
that it may add regulatory relief. PHMSA solicits comments regarding
this proposal, especially as it differs from the NPGA petition (P-
1696). To address possible cost-saving effects on proof pressure-tested
cylinders, PHMSA offers a supplemental analysis in the last section of
this analysis. Due to data uncertainties, this supplemental cost
savings analysis is separate from and secondary to our primary analysis
methods and estimates. PHMSA solicits comments to address these data
uncertainties, specifically comments regarding the extent of proof
pressure testing.
Definition of the Baseline and Rulemaking Scenarios
This rulemaking is expected to have a variety of effects or
impacts, some of which result in cost savings, others in costs. We do
not estimate benefits in this analysis because PHMSA anticipates that
the proposed changes maintain an equivalent level of safety. This
section describes the baseline and rulemaking scenarios, which are the
basis for determining whether the proposed rule may result in costs or
cost savings.
Absent rulemaking action, the existing Statement of Enforcement
Discretion relieves cylinder marketers of the HM-233F requirement to
requalify cylinders every 10 years. However, the Statement of
Enforcement Discretion does not provide regulatory certainty.
Therefore, PHMSA uses the HM-233F or current HMR standards as the
baseline, and uses this rulemaking action (HM-219B) as the rulemaking
scenario and basis for incremental change.
Thus, in the baseline, requalifications are accelerated by 2 years,
resulting in costs; in the rulemaking scenario, these accelerated
requalifications are avoided, resulting in cost savings. This effect
would occur in year one of impacts. In addition, in subsequent years,
the pool of cylinders requiring requalification would be larger in the
baseline than in the rulemaking scenario. Thus, if this rulemaking
becomes effective, PHMSA is also providing ``enduring'' cost savings
due to fewer cylinders being in need of requalification in the
rulemaking versus the baseline scenario. These cost saving effects are
the main effects of this proposed rulemaking.
Please note that this analysis focuses on the cost and cost-savings
impacts of the 2-year acceleration of requalification by volumetric
expansion because there is substantial uncertainty regarding the
proportion and number of cylinders that are requalified by proof
pressure testing. However, in the last section of this cost-savings
analysis, we attempt to address this uncertainty by providing a
supplemental analysis illustrating possible cost-savings effects on
proof pressure-tested cylinders. In the baseline, proof pressure-tested
cylinders must be requalified every 7 years after the initial 12-year
period; in the rulemaking scenario, these cylinders can be requalified
every 10 years after the initial 12-year period. This may enhance
regulatory flexibility, and is a possible mechanism for cost savings.
To better address these uncertainties in future analyses, PHMSA
solicits comment on the proportion and number of cylinders that are
proof pressure-tested versus cylinders tested using other methods. Due
to data uncertainties, we limit our discussion of these proof-pressure
cost savings to the supplemental analysis--they do not factor into our
primary estimates for cost savings.
PHMSA also anticipates another, relatively smaller effect: Cost
savings that result from relieving manufacturers of the need to mark
cylinders with a revised requalification timeframe. This marking is not
an HMR requirement. However, in the baseline scenario, this marking
would need to be revised to indicate a 10-year initial requalification
timeframe, resulting in costs; in the rulemaking scenario, this marking
could continue to indicate a 12-year initial requalification timeframe,
resulting in avoided costs or cost savings.
In addition to cost savings, the HM-219B proposal to retain a
revised timeframe for subsequent proof pressure requalifications may
result in training costs to cylinder marketers. In the baseline,
current HMR requirements would necessitate this training and imposition
of costs on cylinder marketers. Additionally, the rulemaking scenario
will still necessitate this training and imposition of costs, since
proof pressure requirements differ from pre-HM-233F conditions.
In summation, this rulemaking may have a variety of cost and cost-
savings effects, but the main effects are due to the baseline and
rulemaking scenarios for cylinders requalified by volumetric expansion.
In the baseline scenario, cylinders must be initially requalified every
10 years. This is the current HMR requirement, as codified in HM-233F.
Conversely, in the rulemaking scenario, cylinders tested by volumetric
expansion must be requalified every 12 years. This is the change
proposed in this rulemaking (HM-219B), which effectively revises the
requalification timeframe for volumetric expansion testing back to the
standards in place before HM-233F was published. See Exhibit 2.
Exhibit 2--Impacts of HM-219B Provisions for Volumetric Expansion
Testing
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Baseline (no
Rulemaking provision action) HM-219B amendments
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Revise Sec. 180.209(e)........ HMR remains as PHMSA reverts text
made effective in in Sec.
January 2017, and 180.209(e) to its
regulatory text earlier iteration
remains the same before HM-233F.
as in HM-233F.
DOT cylinders must DOT cylinders must
be requalified be requalified
every 10 years. every 12 years.
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The Time Horizon of Analysis
This analysis assumes that this rulemaking will result in a ``one-
time'' impact occurring in the first year the rulemaking is effective
due to accelerated requalifications. After this first year, the
rulemaking will also result in a reduction in the number of cylinders
requiring requalification in any one year.
With respect to year-one impacts, we can elaborate further with an
example using the baseline and rulemaking scenarios. In the baseline
scenario, cylinder marketers need to requalify three different vintages
of cylinders in 2019, specifically those cylinders manufactured or
requalified in 2007, 2008, and 2009. This is the direct result of the
requirement that these cylinders be requalified on a 10-year timeframe
instead of a 12-year timeframe. As such, the HM-233F final rule imposed
an accelerated requalification for cylinders manufactured or
requalified in 2008 and 2009, whereas the cylinders
[[Page 38185]]
manufactured or requalified in 2007 would need to be requalified in
2019 under either the baseline or rulemaking scenario. In the baseline
scenario, 3 years' worth of cylinders need to be requalified in a
single year, with the 2008 and 2009 cylinders needing requalification
earlier than anticipated. Conversely, in the rulemaking scenario, the
2008 and 2009 cylinders can be requalified in 2020 and 2021,
respectively, and the requalification costs that the HM-233F final rule
imposed are avoided. To the extent that cylinders are requalified using
volumetric expansion, this NPRM proposes a requalification timeframe
that would have occurred were the HM-233F final rule never published.
PHMSA's analysis sees this effect as a ``one-time'' or ``year one''
impact. In the baseline, it is a one-time cost imposition; in the
rulemaking scenario, it is a one-time avoidance of these costs (cost
savings). See Exhibit 3.
BILLING CODE 4910-60-P
[GRAPHIC] [TIFF OMITTED] TP06AU19.047
BILLING CODE 4910-60-C
As evident in Exhibit 3, the baseline scenario (HM 233F; current
HMR requirements) primarily affects cylinder requalification in the
first year of the rule's effect. Before this first year, there is no
difference between the baseline and rulemaking scenario. After this
first year of effect (e.g., 2019 onward), the requalification cycle
returns to a ``normal state,'' where only one vintage of cylinders are
requalified per year, although the number of cylinders in need of
requalification in any given year would be smaller in the rulemaking
than in the baseline scenario.
Note that we do not have data on the manufacturing and
requalification dates for the affected cylinders--this affects how we
chose to model the timing of requalification in Exhibit 3 and the
impacts of the baseline and rulemaking scenarios. As evident in Exhibit
3, we assume that each cylinder has a specific manufacturing or
requalification year and do not distinguish between the cylinders on a
more granular level (e.g., month-to-month). For instance, we do not
distinguish between a cylinder from January 2007 and one from June
2007. All 2007 cylinders are assumed to be requalified in 2019, as well
as all 2008 and 2009 cylinders in the baseline. We make no further
distinction about the timing of the manufacture and requalification of
affected cylinders. Further, our analysis does not have a discounting
component for avoiding accelerated requalifications because it is
assumed to occur in the first year of the rulemaking's implementation,
without distinctions between an expenditure made in January 2019 and
one in December 2019, for example. For these reasons, the costs of
accelerated requalification (or the avoidance of these costs) are
undiscounted, one-time or ``year one'' impacts.
In addition to ``year one'' impacts, there is potential for
``enduring'' effects occurring in subsequent years. In subsequent
years, the pool of DOT 4-series specification cylinders that need
requalification in a given year may be smaller in the rulemaking
scenario than in the baseline scenario. In the baseline scenario, this
requalification pool represents effectively 1/10th of cylinders in
service since these cylinders would need requalification once every 10
years. In the rulemaking scenario, this requalification pool would
represent 1/12th of cylinders in service
[[Page 38186]]
since these cylinders would need requalification once every 12 years.
This rulemaking scenario reduction in requalification may result in
cost savings. We attempt to quantify and monetize this effect as a cost
savings, which in tandem with the avoided accelerated requalification
costs, may be substantial. PHMSA solicits comment on the ``one-time''
and ``enduring'' effects, and on this analysis in general. We also
solicit comment on whether there are additional economic effects that
were not foreseen that could be represented in a future, revised
analysis.
Description of the Type and Number of Affected Cylinders
According to information provided by NPGA in P-1696, the revisions
made in the HM-233F final rule affect nearly 5 million DOT 4-series
specification cylinders (e.g., 4B, 4BA, 4BW, and 4E). Furthermore, NPGA
estimates that 75 percent of cylinders are 20-lb. cylinders (used
primarily for BBQ grills, patio heaters, construction heat, temporary
heat, etc.), and the remaining 25 percent comprise a variety of sizes,
e.g., 33.5 lb. (forklift cylinders), 100 lb. (exchange cylinders), and
the largest size, 420 lb. propane cylinders (residential/commercial
heat). Absent any other data describing the population of affected
cylinders, PHMSA uses NPGA's assumptions for this analysis.\10\ See
Exhibit 4.
---------------------------------------------------------------------------
\10\ NPGA does not provide any supporting documentation or other
information describing the basis for these estimates.
Exhibit 4--Affected Cylinders \11\
----------------------------------------------------------------------------------------------------------------
Number of cylinders
Cylinder service sector Cylinder size Distribution (%) requiring accelerated
categories requalification
----------------------------------------------------------------------------------------------------------------
Residential.......................... 20 lbs................. 75 3,750,000
Commercial........................... 33-420 lbs............. 25 1,250,000
--------------------------------------------------------------------------
Total............................ ....................... 100 5,000,000
----------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------
\11\ National Propane Gas Association, ``RE: Supplement to
January 13, 2017 NPGA Petition for Rulemaking and Emergency Stay,''
February 13, 2017 [hereinafter NPGA Supplement]: https://www.regulations.gov/document?D=PHMSA-2017-0083-0003.
---------------------------------------------------------------------------
Exhibit 4 reiterates that, absent this rulemaking, approximately 5
million cylinders would need to be requalified on an accelerated basis.
If this rulemaking is adopted, these 5 million cylinders can be
requalified on a 12-year timeframe. As explained previously, this would
revert volumetric expansion test requalification back to the timing in
place before publication of the HM-233F final rule.
This estimate of the number of affected cylinders is also important
to the estimation of ``enduring'' cost savings. After year one, the
difference between the annual number of cylinders in need of
requalification in the baseline and rulemaking scenarios is an input to
our method for the enduring cost savings. Specifically, NPGA's estimate
of 5 million represents 2 cylinder vintages that would undergo
accelerated requalification. This means an estimated 2.5 million
cylinders may need requalification in any one year. As such, over 12
years, 30 million cylinders would need requalification (2.5 * 12). If
this same number of cylinders were to be requalified instead over 10
years, as the baseline holds, this would mean 3 million cylinders per
year, or an increase of 500,000 cylinders per year. In other words, the
baseline scenario would require that 20% more cylinders be requalified
each year; in the rulemaking scenario, 20% fewer. This differential is
an input to our cost savings method for ``enduring'' cost savings,
which occur after year one.
Based on the accelerated requalifications in year one and the
enduring effects thereafter, PHMSA chooses a time period of analysis of
10 years. A different time period of analysis may result in different
findings and PHMSA may revise this analysis in the future to reflect
different time periods of analysis.
Because PHMSA relies on NPGA assumptions and data, this cost
savings analysis includes a supplemental analysis addressing the number
of affected cylinders. This is provided in the section, ``Supplemental
analysis regarding the number of affected cylinders.''
Description of the Type and Number of Affected Entities
This rulemaking affects various entities, specifically cylinder
marketers and manufacturers. If this rulemaking is not adopted,
cylinder marketers bear the costs of accelerated cylinder
requalification; however, if this rulemaking is adopted, cylinder
marketers achieve a cost savings because they are relieved of the need
to requalify cylinders on an accelerated basis. Moreover, cylinder
marketer employees would require training if this rulemaking is adopted
as proposed, since proof pressure requirements would be different.
Lastly, if adopted, the rulemaking would relieve cylinder manufacturers
of changes to voluntary stamping/marking practices, resulting in cost
savings (avoided training costs). These training costs and cost savings
are detailed in the section, ``Analysis of training costs and cost
savings.''
To describe the type and number of affected cylinder marketers,
PHMSA relies on the North American Industrial Classification System
(NAICS),\12\ specifically sector code 454310 Fuel Dealers.\13\ This
sector is comprised of fuel dealers primarily engaged in retailing
heating oil, liquefied petroleum (LP) gas, and other fuels via direct
selling to customers. For the purposes of this analysis, we call
entities in this sector, ``cylinder marketers'' or ``marketers,'' which
is used synonymously with ``fuel dealers.'' There are approximately
8,700 establishments in this sector.\14\ The employment estimate for
this NAICS sector is approximately 74,000, according to U.S. Census
data. This estimate of the number of cylinder marketer employees is
used as an input in our estimation of this rulemaking's training costs.
We detail cost and cost-
[[Page 38187]]
savings methods and calculations in the sections, ``Analysis of
requalification cost savings'' and ``Analysis of training costs and
cost savings.''
---------------------------------------------------------------------------
\12\ The North American Industry Classification System (NAICS)
is the standard used by Federal statistical agencies in classifying
business establishments for the purpose of collecting, analyzing,
and publishing statistical data related to the U.S. business
economy. The classification framework is updated periodically, and
most Federal statistical agencies currently report data using the
2012 version of the NAICS. The NAICS version--2012--is not related
to the year for which statistical data are being published.
\13\ https://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=454310&search=2012%20NAICS%20Search.
\14\ Ibid.
---------------------------------------------------------------------------
In addition to cylinder marketers, the rulemaking is likely to have
an impact on NAICS sector 332420 Metal Tank Manufacturing,\15\ which is
the sector primarily engaged in cutting, forming, and joining heavy
gauge metal to manufacture tanks, vessels, and other containers. For
the purposes of this analysis, we call entities in this sector,
``cylinder manufacturers,'' or ``manufacturers'' for short. During
2014, this sector included 739 establishments and 36,869 employees.\16\
It is industry practice--albeit not required by the HMR--that DOT 4-
series specification cylinder manufacturers currently place a stamp
during manufacture indicating that the cylinder must be requalified 12
years after the manufacture date.\17\ If this rulemaking is not adopted
(baseline), cylinder manufacturers may need to adjust this stamp to
reflect the 10-year requirement, and implement any necessary training
or manufacturing process changes to do so. This estimate of the number
of cylinder manufacturing employees is used as an input in our
estimation of this rule's training-related cost savings.
---------------------------------------------------------------------------
\15\ https://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=332420&search=2012%20NAICS%20Search.
\16\ U.S. Census Bureau. ``2014 County Business Patterns.''
American Fact Finder, April 21, 2016. https://factfinder.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t.
\17\ See P-1696, pg. 7: https://www.regulations.gov/docket?D=PHMSA-2017-0019.
---------------------------------------------------------------------------
See Exhibit 5 for the estimates of the number of establishments and
employees on payroll for the NAICS sectors, 454310 Fuel Dealers and
332420 Metal Tank Manufacturing.
Exhibit 5--Potentially Affected Entities \18\
----------------------------------------------------------------------------------------------------------------
Number of Employees on
NAICS code NAICS code sector establishments payroll
----------------------------------------------------------------------------------------------------------------
Primarily Affected Industry:
454310.............................. Direct Sales Fuel Dealers. 8,677 73,555
Other Relevant Industry Stakeholders:
332420.............................. Metal Tank Manufacturing.. 739 36,869
----------------------------------------------------------------------------------------------------------------
Analysis of Requalification Cost Savings
---------------------------------------------------------------------------
\18\ U.S. Census Bureau. ``2014 County Business Patterns.''
American Fact Finder, April 21, 2016. https://factfinder.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t.
---------------------------------------------------------------------------
Assuming the rulemaking takes effect in 2019, adoption of this
rulemaking would relieve cylinder marketers of the cost to accelerate
the requalification of cylinders manufactured in 2008 and 2009. PHMSA
believes it would also provide a reduction in the number of cylinders
in need of requalification after year one, on an enduring, year-over-
year basis. In this section, we estimate the value of these potentially
avoided costs.
In the baseline or HM-233F scenario, changes to Sec. 180.209(e)
require cylinder marketers to requalify some cylinders on an
accelerated basis. Based upon assumptions provided by NPGA, a typical
safety inspector can requalify three residential cylinders per hour and
two commercial cylinders per hour.\19\ We estimate the avoided
requalification cost by multiplying the number of residential and
commercial cylinders requiring requalification, from Exhibit 4, by the
amount of time needed to requalify a single cylinder, differentiated by
type, and the mean hourly labor rate \20\ for a safety inspector in the
454310 Fuel Dealers sector.\21\ This approach results in estimated
costs of $15.26-$23.12 to requalify each residential and commercial
cylinder, respectively. Total potentially avoided requalification costs
for these cylinders are estimated to be approximately $86 million
dollars. See Exhibit 6-1.
---------------------------------------------------------------------------
\19\ See NPGA Supplement, Appendix A, for estimates of labor-
hours to requalify residential and commercial cylinders: https://www.regulations.gov/document?D=PHMSA-2017-0083-0003.
\20\ May 2015 National Industry-Specific Occupational Employment
and Wage Estimates NAICS 454300--Direct Selling Establishments;
available at: https://www.bls.gov/oes/current/naics4_454300.htm.
\21\ There may be additional costs, aside from labor,
particularly to the extent that the temporary increased volume of
testing increases wear-and-tear of hydrostatic test equipment and
associated maintenance costs.
Exhibit 6-1--One-Time Avoided Requalification Testing Costs During Year One
----------------------------------------------------------------------------------------------------------------
Labor rate for Avoided
Cylinder type Number of Hours to fuel dealer requalification
cylinders \22\ requalify \23\ inspectors \24\ cost
----------------------------------------------------------------------------------------------------------------
Residential............................. 3,750,000 0.33 $46.23 $57,209,625
Commercial.............................. 1,250,000 0.50 46.23 28,893,750
-----------------------------------------------------------------------
Total............................... ................ ................ ................ $86,103,375
----------------------------------------------------------------------------------------------------------------
PHMSA interprets this impact as a ``one-time'' cost savings that is
assumed to occur over a one-year period during 2019. We do not
distinguish these cost savings on a month-to-month basis because we do
not have data relaying the specific manufacturing dates of the affected
cylinders. Further, this may not be relevant if requalification dates
are uniformly distributed across different months of the year.
---------------------------------------------------------------------------
\22\ See Exhibit 4: Affected Cylinders.
\23\ See NPGA Supplement: https://www.regulations.gov/document?D=PHMSA-2017-0083-0003.
\24\ U.S. BLS wage rate is based on 2015 Occupational and
Employment Statistics Survey (OES) for NAICS 454310 (https://www.bls.gov/oes/current/naics4_454300.htm). Total labor rate also
includes other costs of employee compensation (i.e., benefits) based
on BLS' Employer Costs for Employee Compensation Summary, which
indicates that private industry labor rates are, overall, comprised
of wages/salaries (68.6%) and benefits (30.2%), https://www.bls.gov/news.release/ecec.nr0.htm.
---------------------------------------------------------------------------
There is also cost savings due to enduring, year-over-year effects
in which the number of cylinders in need of requalification is expected
to be fewer in the rulemaking scenario. With a longer requalification
timeframe (12
[[Page 38188]]
years vs. 10 years), there are fewer cylinders in need of
requalification in a given year. In a previous section regarding the
affected number of cylinders, PHMSA estimated that 20% fewer cylinders
would be in need of requalification in the rulemaking scenario.
Combining this 20% estimate with the cost findings related to year one
impacts, we can estimate enduring, year-over-year cost savings. This
assumes that input values (e.g., labor rates, time to requalify,
breakdown of cylinder types) remain constant over the time period of
analysis. For example, labor rates are assumed to be constant; if they
were adjusted to reflect inflation, our cost savings estimate would be
higher.
Thus, Exhibit 6-1 above provides that the accelerated
requalification of 2 cylinder vintages would result in approximately
$86 million. We divide that figure in half to represent annual
requalification costs and then take 20% of the resulting figure to
estimate enduring, year-over-year cost savings.\25\ This gives
approximately $8.6 million in undiscounted, yearly cost savings.
Equivalently, if 500,000 extra cylinders need requalification on an on-
going basis in the baseline, this amounts to 1/10th of the ``glut''
created by the accelerated requalification in year one and hence 10% of
the estimated costs.\26\ Exhibit 6-2 below presents these cost savings
in years 2-10, as well as the year-one cost savings based on avoidance
of accelerated requalification. We present undiscounted (0%) and 3% and
7% discount rates.
---------------------------------------------------------------------------
\25\ $86,103,375/2 = $43,051,688. $43,051,688 * 0.2 =
$8,610,337.60.
\26\ $86,103,375 * 0.10 = $8,610,337.5
Exhibit 6-2--Cost Savings Due to Avoidance of Accelerated Requalification in Year 1 and Reduction in Number of
Needed Requalifications in Years 2-10; Net Present Value and Annualized at 0%, 3%, and 7% Discount Rates
----------------------------------------------------------------------------------------------------------------
Year Undiscounted (0%) 3% 7%
----------------------------------------------------------------------------------------------------------------
1....................................... $86,103,375............... $86,103,375 $86,103,375
2....................................... 8,610,338................. 8,359,551 8,047,044
3....................................... 8,610,338................. 8,116,069 7,520,602
4....................................... 8,610,338................. 7,879,679 7,028,600
5....................................... 8,610,338................. 7,650,173 6,568,785
6....................................... 8,610,338................. 7,427,353 6,139,052
7....................................... 8,610,338................. 7,211,022 5,737,431
8....................................... 8,610,338................. 7,000,992 5,362,085
9....................................... 8,610,338................. 6,797,080 5,011,295
10...................................... 8,610,338................. 6,599,107 4,683,453
----------------------------------------------------------------------------------------------------------------
Net Present Value (Total)....................................... 153,144,405 142,201,727
-----------------------------------------------------------------------
Annualized...................................................... 17,953,196 20,246,327
----------------------------------------------------------------------------------------------------------------
Therefore, if this proposed rule is adopted, cylinder marketers in
the 454310 Fuel Dealers NAICS sector would be relieved of requalifying
approximately 5 million cylinders in year one, which would save them
approximately $86 million dollars in costs (undiscounted). Conversely,
$86 million in requalification costs would be imposed in year one if
this rulemaking is not adopted, which this analysis assumes would
sustain HM-233F's requirement for a 10-year requalification timeframe.
Moreover, if adopted, cylinder marketers would have 20% fewer cylinders
to requalify in each year after year one. This results in cost savings
of approximately $8.6 million in years 2-10 (undiscounted).
Combining these two cost savings effects together, cylinder
marketers are expected to save $142.2 million over 10 years, discounted
at 7%. On an annual basis, they are expected to save $20.2 million
annualized at 7%. We use these figures to calculate total net cost
savings later in the document, but first we must account for training-
related cost savings, as well as some training-related costs, due to
the rulemaking scenario.
Analysis of Training Costs and Cost Savings
This rulemaking may relieve approximately 18,000 cylinder
manufacturing employees from needing training. In the baseline
scenario, these cylinder manufacturing employees may need to change the
way they voluntarily stamp newly-manufactured cylinders, necessitating
training; conversely, in the rulemaking scenario, their stamping
practices can remain unchanged, avoiding this training and associated
costs. The net effect of these training-related impacts is quantified
in the section, ``Analysis of total net cost savings.''
However, this rulemaking is also likely to result in approximately
36,000 cylinder marketer employees to need training on the proposed
changes to proof pressure requalification periods. Specifically, PHMSA
is proposing to retain the 10-year requalification timeframe for
cylinders that are initially requalified using proof pressure testing.
This may provide cylinder marketers regulatory relief by reducing the
requalification frequency for proof pressure, but it is also likely to
necessitate training because this proposal diverges from the standards
in place before the HM-233F final rule. PHMSA seeks comment on this
proposal.
Regarding the training of cylinder marketers, their employees need
to understand that a 12-year timeframe applies to cylinders initially
and subsequently requalified by volumetric expansion testing, and that
a 10-year timeframe applies to cylinders requalified by proof pressure
testing after an initial 12-year period. In P-1696, NPGA suggests that
this training would take two hours per employee and that approximately
half of employees would require training.\27\ PHMSA believes only the
training portion related to proof pressure testing is a relevant
change, so we assume this training takes just one hour per employee,
and, as stated by NPGA, that half of employees would require training.
Thus, we take the number of
[[Page 38189]]
employees for the 454310 Fuel Dealers sector from Exhibit 5 (73,555)
and divide it by 2 to get the number of these employees requiring
training (73,555/2 = 36,778, with rounding). We use the hourly labor
rate for these 454310 Fuel Dealers employees, as exhibited in Exhibit
6-1 ($46.23), and multiply by 1 training hour to estimate the cost to
train each employee ($46.23 * 1 = $46.23). We then multiply $46.23 by
the number of 454310 Fuel Dealers employees requiring training to
estimate the training cost for these employees ($46.23 * 36,778 =
$1,700,247, with rounding).
---------------------------------------------------------------------------
\27\ See P-1696: https://www.regulations.gov/docket?D=PHMSA-2017-0019.
---------------------------------------------------------------------------
As NPGA explains in P-1696, millions of cylinders currently in
service show a stamp placed during manufacture, indicating that the
cylinder must be requalified 12 years after the manufacture date. Under
the baseline scenario, cylinder manufacturers would need to adjust this
stamp to indicate a 10-year period. From this vantage, this proposed
rulemaking results in training cost savings for cylinder manufacturers,
not training costs; in other words, the regulations proposed here
ensure that cylinder manufacturers can continue the industry practice
of stamping to reflect the 12-year timeframe for initial
requalification.
To estimate training cost savings for cylinder manufacturers, PHMSA
references NPGA's estimate that training would take two hours per
employee and that approximately half of employees would require
training.\28\ Thus, we take the number of employees for the 332420
Metal Tank Manufacturing NAICS sector from Exhibit 5 (36,869) and
divide it by 2 to get the number of these employees requiring training
(36,869/2 = 18,435, with rounding). We use $52.48 as the hourly labor
rate for 332420 Metal Tank Manufacturing employees and multiply by 2
training hours to estimate the cost to train each employee ($52.48 * 2
= $104.96).\29\ We then multiply $104.96 by the number of 332420 Metal
Tank Manufacturing employees requiring training to estimate the
training cost savings for these employees ($104.96 * 18,435 =
$1,934,938, with rounding).
---------------------------------------------------------------------------
\28\ Ibid.
\29\ U.S. BLS wage rate is based on 2015 Occupational and
Employment Statistics Survey (OES) for NAICS 332420. Total labor
rate also includes other costs of employee compensation (i.e.,
benefits) based on BLS' Employer Costs for Employee Compensation
Summary; available at: https://www.bls.gov/news.release/ecec.nr0.htm.
---------------------------------------------------------------------------
Based on these assumptions, input values, and methods, PHMSA
estimates net cost savings related to training, totaling approximately
$0.2 million dollars (undiscounted). See Exhibit 7. These training
costs and cost savings would occur in year one of implementation of the
rulemaking and are not discounted. They are not modeled to repeat in
subsequent years.
Exhibit 7--Training Costs/(Cost Savings)
[Year one; undiscounted]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of
NAICS Sector Number of Percent employees Training Labor rate Total
employees \30\ trained trained hour(s) \31\ training cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fuel Dealers (454310)................................... 73,555 50 36,778 1 $46.23 $1,700,247
Manufacturers (332420).................................. 36,869 50 18,435 2 52.48 (1,934,938)
-----------------------------------------------------------------------------------------------
Total............................................... .............. .............. .............. .............. .............. (234,691)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Analysis of Total Net Cost Savings
PHMSA outlined our assumptions, input values, and methods for
estimating the expected costs and cost savings of this rulemaking. We
now present the total net cost savings as the sum of net cost savings
to both 454310 Fuel Dealers and 332420 Manufacturers. See Exhibit 8-1.
As such, we estimate total net cost savings at approximately $163.8
million dollars, undiscounted.
---------------------------------------------------------------------------
\30\ CB1400A11: Geography Area Series: County Business Patterns
2014 Business Patterns.
\31\ U.S. BLS wage rate is based on 2015 Occupational and
Employment Statistics Survey (OES) for NAICS 454310 and 332420.
Total labor rate also includes other costs of employee compensation
(i.e., benefits) based on BLS' Employer Costs for Employee
Compensation Summary, available at: https://www.bls.gov/news.release/ecec.nr0.htm.
\32\ A value in parenthesis indicates a cost, or a ``negative
cost savings.''
Exhibit 8-1--Total Net Cost Savings
[Undiscounted]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cost savings
Cost savings (``enduring'' reduction
Sector (``avoided accelerated in annual number of Training cost savings Net cost savings
requalification'' in needed \32\
year 1) requalifications)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fuel Dealers (454310)............................... $86,103,375 $77,493,038 ($1,700,247) $161,896,166
Manufacturers (332420).............................. 0 0 1,934,938 1,934,938
---------------------------------------------------------------------------------------------------
Total........................................... 86,103,375 77,493,038 234,691 163,831,104
--------------------------------------------------------------------------------------------------------------------------------------------------------
We also discount these savings over the time period of analysis.
See Exhibit 8-2. To year one, we add the net cost savings related to
training ($234,691) to cost savings related to the avoidance of
accelerated requalification ($86,103,375), yielding $86,338,066 in cost
savings in year one. The year-one impacts related to both effects are
not discounted; they are assumed to occur at present value. However,
the ``enduring'' cost savings are discounted according to the discount
rate and the appropriate year in which the savings occurs. As such, we
estimate total net cost savings of $142.4 million over 10 years,
discounted at 7%, and $20.3 million annualized at 7%. These total
figures do not differ much from the results presented in Exhibit 6-2
because
[[Page 38190]]
training impacts are very small relative to requalification impacts.
Exhibit 8-2--Total Net Cost Savings Over 10 Years; Net Present Value and Annualized at 3% and 7% Discount Rates
----------------------------------------------------------------------------------------------------------------
Year Undiscounted 3% 7%
----------------------------------------------------------------------------------------------------------------
1............................................................... $86,338,066 $86,338,066 $86,338,066
2............................................................... 8,610,338 8,359,551 8,047,044
3............................................................... 8,610,338 8,116,069 7,520,602
4............................................................... 8,610,338 7,879,679 7,028,600
5............................................................... 8,610,338 7,650,173 6,568,785
6............................................................... 8,610,338 7,427,353 6,139,052
7............................................................... 8,610,338 7,211,022 5,737,431
8............................................................... 8,610,338 7,000,992 5,362,085
9............................................................... 8,610,338 6,797,080 5,011,295
10.............................................................. 8,610,338 6,599,107 4,683,453
----------------------------------------------------------------------------------------------------------------
Net Present Value (Total)................................................... $153,379,096 $142,436,418
-----------------------------------------------
Annualized.................................................................. $17,980,709 $20,279,741
----------------------------------------------------------------------------------------------------------------
Evaluation of Non-Quantified and Non-Monetized Impacts
PHMSA has not estimated quantitatively all the possible cost and
cost-savings impacts of this rulemaking. This is due to data
availability and uncertainty surrounding the actual impacts of the
rulemaking if it is made effective. Ultimately, the actual impacts of
the rulemaking may vary from the representation in this analysis; this
analysis merely represents our expectations based on the available data
and our professional judgment. For these reasons, PHMSA solicits
comment on this rulemaking and its analysis as expressed in this NPRM.
To address some of these uncertainties and data limitations, we
have identified various non-quantified costs and cost savings that
might result from adopting this rulemaking. Our discussion here of non-
quantified and non-monetized impacts is not exhaustive. For example,
PHMSA can identify the following potential impacts, which are not
quantified or monetized in this analysis:
1. Changes in the number of cylinders taken out of service due to
accelerated requalification requirements;
2. Changes in the demand for or supply of DOT 4-series cylinders
and requalification services; and
3. Changes in the prices faced by propane consumers.
If this rulemaking is not adopted, PHMSA expects there may be
changes in the number of cylinders that are taken out of service in the
first year of the rule's effect due to failure of a requalification
test. The HM-233F final rule accelerated initial requalification
requirements, resulting in industry performing triple the number of
requalification tests during year one. The increase in the number of
requalification tests performed in year one means there could also be
an increase in the number of cylinders that are taken out of service as
a result of the requalification testing. To the degree that accelerated
testing would result in cylinders being removed from service sooner,
cylinder marketers would incur costs to acquire more replacement
cylinders. PHMSA has not quantified the number of cylinders that might
be ``prematurely'' taken from service and has not monetized the costs
of replacing them. This represents a new category of potential costs
under the baseline scenario and a new category of potential cost
savings for cylinder marketers under the petition scenario. As such,
the cost savings of adopting this rulemaking may be understated.
Therefore, PHMSA seeks comments and any supporting data on this
analysis, including comments and data regarding the potential effect of
accelerated requalification on the number of cylinders removed from
service and associated costs.
In addition, if this rulemaking is not adopted, PHMSA can
anticipate changes in the supply of and demand for DOT 4-series
specification cylinders, as well as cylinder requalification services.
For instance, accelerated requalification requirements may be expected
to result in higher costs for cylinder marketers, disincentivizing
cylinder supply in the overall market. Similarly, a temporary increase
in the demand for cylinder requalification services could affect the
price of these services faced by cylinder marketers. As another
example, accelerated requalification requirements may result in
increased demand for newly manufactured cylinders to the extent that
they are a substitute for requalified cylinders. A temporary increase
in the demand for newly manufactured cylinders might result in a
temporary increase in economic activity for that sector and could
affect the prices for these cylinders and the revenues of cylinder
manufacturing companies. PHMSA has not quantified these market dynamics
because of their complexity and highly uncertain nature.
Lastly, there is uncertainty about the potential impact on
consumers (e.g., propane end-users), so PHMSA has not quantified
downstream price impacts. This is also a question of market dynamics.
Specifically, the baseline scenario may result in price increases for
propane-related goods and services for end-use consumers to the degree
that the cylinder manufacturers and marketers are able to pass
additional costs onto consumers.
Characterization of Additional Uncertainty in Impacts, Including
Estimated Costs, Cost Savings, and Net Cost Savings
The discussion in the previous section characterizes non-quantified
and non-monetized impacts of this rulemaking. Other impacts were
quantified and/or monetized in this analysis, but PHMSA's estimates
remain uncertain. As such, this section characterizes additional
uncertainty in the quantitative impacts estimated in this analysis.
Note that this discussion is not exhaustive. PHMSA solicits comments on
our analysis, including commentary on where our estimates could be
improved and findings made more accurate. We note uncertainty in these
quantitative areas:
1. Estimate of the number of affected entities and employees;
[[Page 38191]]
2. Estimate of the training hours necessitated by the rulemaking;
3. Estimate of the labor hours needed to requalify affected
cylinders;
4. Estimate of the number of affected cylinders;
5. Proportion of cylinders initially requalified by proof pressure
testing (estimated only in the supplemental analysis); and
6. Number of cylinders initially requalified by proof pressure
testing (estimated only in the supplemental analysis).
As outlined, there is uncertainty regarding the estimate of the
number of affected entities and, thus, the number of affected
employees, per Exhibit 5. This uncertainty arises from the fact that
only some establishments in NAICS 454310 Fuel Dealers may sell fuels in
DOT 4-series specification cylinders affected by Sec. 180.209(e).
There may also be propane marketing entities in other NAICS sectors,
but current data do not support estimates of the portion of affected
establishments in additional sectors. These uncertainties may result in
training costs or cost savings being over or underestimated. Since the
number of affected entities is not actually used as an input variable
to determine training costs or cost savings, we do not explore this
variable in a supplemental analysis.
As another example of uncertainty in this analysis, PHMSA is not
able to corroborate the NPGA estimate regarding the amount of time
required for training. NPGA estimated that each employee would need two
hours to be appropriately trained on the revised requalification
periods. Since training costs are proportionately small compared to
estimated requalification cost savings, we do not explore this
uncertainty in a supplemental analysis. To illustrate this point,
consider a simple example. Doubling the amount of time for training
cylinder marketing employees would double estimated training costs,
from approximately $1.7 million to $3.4 million, yet training costs
would remain a relatively small proportion of the estimated, year-one
requalification cost savings ($3.4 million/$86.1 million = 3.9%). It is
unlikely that variance in this input value would alter PHMSA's
assessment that this rulemaking provides total net cost savings.
We are also unable to corroborate NPGA's estimate regarding the
amount of time required to requalify affected cylinders. To the extent
that it takes longer to requalify affected cylinders, requalification
costs are understated in the baseline scenario and cost savings are
understated in the rulemaking scenario. If less time is required to
requalify affected cylinders, the reverse is true: Requalification
costs are overstated in the baseline scenario and requalification cost
savings are overstated in the rulemaking scenario. However, we believe
that NPGA is uniquely positioned to estimate this variable due to the
nature of its member representation. For this reason, we do not explore
this variable with a supplemental analysis.
Furthermore, PHMSA is not able to corroborate the NPGA estimate for
the number of affected cylinders. In this analysis, we rely on NPGA's
estimate of approximately 5 million cylinders affected due to
accelerated requalification. The number of cylinders affected is a
critical input value for the estimation of cylinder requalification
costs and cost savings in the baseline and rulemaking scenarios,
respectively. Moreover, this specific variable presents uncertainty in
that the NPGA estimate may be overestimated. This is because the HMR
allow a cylinder, filled before the requalification becomes due, to
remain in service until it is emptied.\33\ As such, filled cylinders
may remain in service, and cylinder marketers would not need to remove
compliant cylinders from service to meet the 10-year requalification
timeframe codified in the HM-233F final rule and presented in this
analysis as the baseline scenario. To the extent that fewer cylinders
need to be requalified to meet the 10-year timeframe in the baseline
scenario, the requalification costs estimated in the baseline scenario
and the requalification cost savings in the rulemaking scenario are
both overstated. To explore this uncertainty further, we provide a
supplemental analysis regarding the number of affected cylinders in the
following section.
---------------------------------------------------------------------------
\33\ See Sec. 180.205(c).
---------------------------------------------------------------------------
Lastly, PHMSA notes uncertainty regarding the proportion and number
of affected cylinders that would be requalified using proof pressure
testing versus other methods. Proof pressure testing is an alternative
to volumetric expansion testing. Despite proposing to retain the 10-
year timeframe for a cylinder initially requalified by proof pressure
testing, PHMSA did not include proof pressure-related requalification
cost savings in our primary estimates because of the uncertainty
surrounding the extent to which proof pressure testing is used to
requalify the affected cylinders. If it is costlier to requalify using
proof pressure testing than volumetric expansion testing and
requalifiers continue to use proof pressure methods, then costs may be
understated in the baseline scenario and cost savings may be
understated in the rulemaking scenario. To the extent that requalifiers
use proof pressure testing and it is less costly to requalify by proof
pressure testing, then costs may be overstated in the baseline scenario
and cost savings may be overstated in the rulemaking scenario. There
also may be little or no difference between the costs of requalifying
by volumetric expansion and proof pressure testing. PHMSA solicits
comment on the extent of proof pressure testing versus other
requalification methods.
Furthermore, our requalification cost savings analysis
characterizes the timing of initial requalification in relation to
cylinder manufacture. Refer to Exhibit 3. For volumetric expansion
testing, the distinction between initial and subsequent requalification
tests is not relevant since they would both occur at 12-year intervals;
however, for proof pressure testing, the question of whether the
cylinder is being initially or subsequently requalified is relevant and
would determine the regulatory timeframe that applies (12 or 10 years).
Noting this distinction, it may be reasonable to conceive of the cost-
savings impacts on proof pressure-tested cylinders as altogether
separate and possibly affecting a different, older pool of cylinders.
We do not know whether the estimate of affected cylinders that NPGA
provided accommodates this distinction. Put another way, uncertainty
surrounds the proportion and number of cylinders that would be
initially requalified by proof pressure testing versus volumetric
expansion testing, as well as the overall number of cylinders that are
requalified using proof pressure testing during subsequent
requalification tests. These uncertainties are substantial to the point
that we refrain from including cost savings related to proof pressure-
tested cylinders in our primary estimates.
Nevertheless, we provide a supplemental analysis for the possible
cost savings effects on proof pressure-tested cylinders, specifically
how this proposed rulemaking would affect different vintages of
cylinders that would initially be requalified by proof pressure (at the
12-year mark) and subsequently requalified at the 10-year mark as
opposed to the 7-year mark, amounting to a 3-year deferral of these
requalification tests and associated costs. This supplemental analysis
is found in the section, ``Supplemental analysis regarding possible
effects on proof pressure-tested cylinders.''
See Exhibit 9 for a distillation of the uncertainties discussed in
this analysis.
[[Page 38192]]
Exhibit 9--Uncertainties Associated With the Regulatory Cost Analysis
[Quantified and non-quantified]
----------------------------------------------------------------------------------------------------------------
Description of
Variable Estimate(s) Source uncertainty
----------------------------------------------------------------------------------------------------------------
Number of affected entities....... Fuel Dealers: 8,677.. U.S. Census............... Additional NAICS
Manufacturers: 739... sectors may be affected.
Total: 9,416......... Affected
entities may be a subset
of represented NAICS
sectors.
Number of
affected entities may
vary from estimates,
which is likely to
affect the number of
employees in need of
training.
Number of affected employees...... Fuel Dealers: 36,778. U.S. Census............... Additional
Manufacturers: 18,435 employees in other NAICS
Total: 55,213........ sectors may require
training.
The number of
employees in represented
NAICS sectors may vary.
Training costs
are positively related
to the number of
employees.
Training hours per employee....... 1-2.................. NPGA...................... Training hours
per employee may vary.
Training costs
are positively related
to the training hours
per employee.
Percent of affected employees in 50%.................. NPGA...................... Percent of
need of training. affected employees in
need of training may
vary.
This percentage
is positively related to
training costs.
Labor hours to requalify Residential: 0.33 NPGA...................... Labor hours per
residential and commercial hours. cylinder requalification
cylinders. Commercial: 0.5 hours may vary.
Labor hours to
requalify affected
cylinders is positively
related to
requalification costs
and cost savings.
Labor rates....................... Fuel Dealers: $46.23. U.S. BLS.................. Labor rates for
Manufacturers: $52.48 cylinder marketers and
cylinder manufacturers
may vary.
Labor rates for
cylinder marketers are
positively related to
cylinder requalification
costs and cost savings,
as well as training
costs.
Labor rates for
cylinder manufacturers
are positively related
to training cost
savings.
Number of affected cylinders...... 5,000,000............ NPGA...................... Number of
affected cylinders may
vary.
HMR allows
compliant in-service
cylinders to remain in
service past required
requalification dates.
Number of
affected cylinders
positively relates to
requalification costs
and cost savings.
Number of cylinders removed from Non-quantified....... N/A....................... Accelerated
service early. requalification may
increase or expedite the
number of cylinders
removed from service.
Cylinder
marketers may face
increased replacement
costs.
Cost to requalify (market Non-quantified....... N/A....................... Accelerated
dynamics). requalification may
affect requalification
capacity or throughput.
Accelerated
requalification may
increase requalification
costs/pricing.
Cost of newly manufactured Non-quantified....... N/A....................... Increased
cylinders (market dynamics). requalification costs
may reduce supply of
available requalified
cylinders.
Newly
manufactured cylinders
may be a substitute for
a requalified cylinder.
Demand for newly
manufactured cylinders
may increase.
Price of newly
manufactured cylinders
may in turn increase.
End-user cylinder prices (market Non-quantified....... N/A....................... End-user market
dynamics). prices may be positively
related to
requalification and
training costs.
Cylinder
marketers and
manufacturers may pass
on compliance costs to
end-users (e.g., propane
consumers).
Proportion of proof pressure- Non-quantified in N/A....................... See supplemental
tested cylinders. primary analysis. analysis.
High proportion
of proof pressure-tested
cylinders could result
in material cost savings
due to deferred
subsequent
requalification.
Low proportion
of these cylinders
minimizes forgone cost
savings if 7-year
requirement were adopted
(not proposed).
Number of affected proof pressure- Non-quantified in N/A....................... See supplemental
tested cylinders. primary analysis. analysis.
Large number of
proof pressure-tested
cylinders could result
in material cost savings
due to deferred
subsequent
requalification.
Small number of
these cylinders
minimizes forgone cost
savings if 7-year
requirement were adopted
(not proposed).
----------------------------------------------------------------------------------------------------------------
[[Page 38193]]
Supplemental Analysis Regarding the Number of Affected Cylinders
As previously discussed, PHMSA believes the number of affected
cylinders may differ from NPGA's estimate of 5 million affected
cylinders. For example, affected cylinders may be fewer than 5 million
due to existing allowances in the HMR. Specifically, a cylinder that is
filled prior to its requalification date may remain in service until it
is emptied. For this reason, the number of cylinders that would need to
undergo accelerated requalification in the baseline scenario could be
fewer than estimated, and associated costs would be less than
estimated. Similarly, the cost savings in the rulemaking scenario would
be less than estimated. For example, imagine a cylinder manufactured in
2009; in the baseline scenario, this cylinder would need to be
initially requalified in 2019 (10 years later), even though cylinder
marketers conventionally expected this cylinder to be requalified in
2021 (12 years later). If that cylinder were filled prior to 2019, but
remained in service to the end-user until 2021, this cylinder would not
need to be requalified until 2021 despite the regulatory change made in
the HM-233F final rule.
Thus, for this cylinder, the baseline and rulemaking scenario are
no different. No new cost is imposed in the baseline; no cost savings
are achieved by adopting this rulemaking.
Nevertheless, PHMSA does not have data to estimate the number of
cylinders that would remain in service under HMR allowances despite the
acceleration of their requalification date, and NPGA may have
considered this factor when developing its estimate. Even if data were
available, this task of differentiating cylinders in this manner would
undoubtedly be complicated given differences in service periods. Since
we are unable at this time to corroborate NPGA's estimate, PHMSA also
considers a scenario where the number of affected cylinders may be
greater than estimated in this analysis. This could be the case if NPGA
based its estimate on information from its members and there are
marketers that are not members of NPGA who requalify cylinders.
In the absence of additional data, PHMSA uses a simple, assumption-
based method to present the cost saving variances that would be
expected if the number of affected cylinders were 25 percent fewer or
25 percent greater. This gives us a range of requalification cost-
savings estimates occurring in year one, and over the 10-year time
period of analysis. See Exhibit 10.
Exhibit 10--High-, Mid-, and Low-Range Cost Savings Estimates Based on the Number of Affected Cylinders
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated Total estimated
Scenario label(s) Number of affected Proportion of primary requalification cost requalification cost
cylinders estimate savings (year one) savings (years 1-10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
High................................................ 6,250,000 1.25 $107,629,219 $204,495,516
Primary/Middle/NPGA................................. 5,000,000 1.0 86,103,375 163,596,413
Low................................................. 3,750,000 0.75 64,577,531 122,697,309
--------------------------------------------------------------------------------------------------------------------------------------------------------
This simple, straightforward exercise shows that cost savings would
be lower if fewer cylinders are affected by the proposed rule due to,
for example, the current HMR allowance to keep a cylinder in service
past its requalification date. Similarly, if the number of affected
cylinders is greater than estimated, cost savings would also be
greater. PHMSA solicits comments on this analysis, including the
supplemental analysis and our estimate of the number of affected
cylinders (5 million) in year one, which is the same as NPGA's. Despite
the allowance for in-service cylinders in the HMR and other
uncertainties, we continue to use NPGA's estimate because it is the
best data available.
Supplemental Analysis Regarding Possible Effects on Proof Pressure-
Tested Cylinders
PHMSA focused its cost savings analysis on revising the
requalification timeframe for cylinders that are requalified by
volumetric expansion. This reflects NPGA's emphasis in its petition for
rulemaking (P-1696) and the uncertainty surrounding the extent of
impacts on proof pressure-tested cylinders. As discussed in this
analysis, PHMSA does not know the proportion or total number of
affected cylinders that would be requalified using proof pressure
testing, or whether these variables would have any material influence
on our cost and cost savings estimates. Similarly, we do not know
whether proof pressure-tested cylinders constitute an additional (and
possibly older) pool of affected cylinders beyond NPGA's estimate of 5
million cylinders affected in year one. If so, then cost and cost
savings estimates may be understated in this analysis. Nevertheless,
PHMSA explores the possible effects on proof pressure-tested cylinders
in this supplemental analysis. Specifically, we explore the difference
between a 7-year timeframe and a 10-year timeframe for cylinder
requalification occurring after initial requalification (i.e.,
``subsequent'' or second requalification). By way of the HM-233F final
rule, the HMR currently reflect a 10-year timeframe for both initial
and subsequent requalification of proof pressure-tested cylinders,
whereas the pre-HM-233F standard held that proof pressure-tested
cylinders would be initially requalified at the 12-year mark and
subsequently requalified on a 7-year timeframe.
In its petition, NPGA appears to recommend that the proof pressure
standard for subsequent requalification be reverted to the 7-year
timeframe in the HMR prior to HM-233F's publication.\34\ In contrast,
this NPRM proposes to retain the 10-year requalification timeframe
since it may add relief. PHMSA solicits comment on this proposal.
---------------------------------------------------------------------------
\34\ See P-1696: https://www.regulations.gov/docket?D=PHMSA-2017-0019.
---------------------------------------------------------------------------
PHMSA believes this proposal would offer additional relief because
it would enable cylinder marketers to defer by up to 3 years the
subsequent requalification of cylinders that would otherwise be subject
to the 7-year requirement. This deferral changes the timing of cash
flow obligations for cylinder marketers and presents a potential cost
savings.
Exhibit 11 illustrates the difference between the 7- and 10-year
proof pressure requalification timeframes. Please note, this
supplemental analysis relays these abstract scenarios for analysis
purposes only; one must refer to the regulatory text of the proposed
[[Page 38194]]
rule to understand actual regulatory changes and effects.
BILLING CODE 4910-60-P
[GRAPHIC] [TIFF OMITTED] TP06AU19.048
BILLING CODE 4910-60-C
Exhibit 11 illustrates the effects of the proposal to allow a 3-
year deferral of subsequent requalification by proof pressure test. In
2019, under the 7-year requirement, industry would requalify cylinders
manufactured in 2000 and initially requalified using proof pressure in
2012; that same set of cylinders would need to be subsequently
requalified 7 years later in 2019. In contrast, under the 10-year
requirement, industry could defer requalifying those same cylinders
until 2022. By 2022, although the timeframe has shifted, industry is
back to a more normal condition where subsequent requalification needs
to be performed annually.
The potential value of these cost savings is less certain than the
cost savings estimates in the primary analysis, because it is not clear
what proportion of requalification tests are performed using proof
pressure testing (and therefore what number of cylinders would be
affected).\35\ Due to this uncertainty, we do not incorporate proof
pressure-related cost savings into our primary analysis and its
estimation of requalification cost savings. However, by adopting some
assumptions similar to those used in our primary analysis, it is
possible to provide an approximate measure of these cost savings.
---------------------------------------------------------------------------
\35\ It is also somewhat further complicated by the fact that
the provision applies not just to a second requalification, but any
requalification that follows a prior requalification performed using
the proof-pressure test (third, fourth, etc.).
---------------------------------------------------------------------------
Based on NPGA's estimate, the primary analysis assumed that 5
million cylinders would be affected by the changes to the volumetric
expansion timeframes. These 5 million affected cylinders came from two
different vintages of cylinders. Assuming there are 2.5 million
affected cylinders per vintage, there would be 7.5 million cylinders
potentially affected by the 3-year deferral of subsequent proof
pressure requalification requirements. Absent information on the
frequency with which proof pressure testing is used, we assume a range
of 5 percent to 15 percent of these cylinders were initially
requalified using proof pressure testing. This suggests an estimate of
approximately 0.38-1.13 million potentially affected cylinders during
2019 to 2021 (7,500,000 * 0.05 = 375,000; 7,500,000 * 0.15 =
1,125,000). We adopt the same prior assumptions regarding the
allocation of cylinders between residential and commercial customers
(75 percent residential and 25 percent commercial), the labor rate for
employees performing the requalification tests ($46.23), and the time
required to perform a requalification (0.33 hours for each residential
cylinder and 0.5 hours for each commercial cylinder). Please note, the
amount of time required to complete a requalification may vary between
volumetric expansion and proof pressure testing.
This approach results in total potentially avoided requalification
costs of $6.46-$19.38 million dollars, as presented in Exhibit 12.
[[Page 38195]]
Exhibit 12--Estimate of Potentially Avoided Requalification Costs Associated With the HM-233F Proof Pressure Test Provision
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of affected Avoided
Cylinder type cylinders \36\ Hours to requalify Labor rate for fuel requalification cost
(million) \37\ dealer inspectors \38\ (million)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Residential......................................... 0.281-0.844 0.33 $46.23 $4.29-$12.88
Commercial.......................................... 0.094-0.281 0.50 $46.23 $2.17-$6.50
---------------------------------------------------------------------------------------------------
Total........................................... ....................... ....................... ....................... $6.46-$19.38
--------------------------------------------------------------------------------------------------------------------------------------------------------
\36\ Exhibit 4: Affected Cylinders.
\37\ This is based on the NPGA's estimate.
\38\ U.S. BLS wage rate is based on 2015 Occupational and Employment Statistics Survey (OES) for NAICS 454310 (https://www.bls.gov/oes/current/naics4_454300.htm). Total labor rate also includes other costs of employee compensation (i.e., benefits) based on BLS' Employer Costs for Employee
Compensation Summary, which indicates that private industry labor rates are, overall, comprised of wages/salaries (68.6%) and benefits (30.2%), https://www.bls.gov/news.release/ecec.nr0.htm.
In its petition, NPGA appears to recommend maintaining the status
quo (pre-HM-233F conditions), that is, a 7-year requirement for proof
pressure testing after initial requalification, while foregoing the
possible cost savings suggested by this supplemental analysis and
proposed rule. This supplemental analysis gives some indication that
the combined net effect of both provisions would remain beneficial to
the petitioner; specifically, the incremental costs that are avoided by
NPGA's petition are expected to be larger than the cost savings
foregone by its petition. By this logic, the gains of avoiding the
acceleration of volumetric expansion requalification testing should
outweigh the gains of deferring subsequent proof pressure
requalification testing. Quantitatively, within this framework, the
value of foregone cost savings begins to exceed the value of avoided
costs if one assumes that approximately 67 percent or more of cylinders
are requalified using the proof pressure test. This is simply an
abstract comparison between the primary analysis' estimation of cost
savings at initial requalification (assuming use of volumetric
expansion) and the supplemental analysis' estimation of cost savings at
subsequent qualifications (assuming use of proof pressure). Many other
factors could affect whether NPGA's recommendations in P-1696 will
yield net cost savings, such as there being a different cost to perform
the different tests.
In summation, based on this supplemental analysis, PHMSA's proposal
in this NPRM might lead to overall cost savings that exceed the
estimates specified in the primary analysis. The primary analysis
yielded net cost savings of $163.83 million (undiscounted), whereas
this supplemental analysis estimated an additional $6.46-$19.38 million
in cost savings. Thus, if the two effects affect separate cylinder
cohorts and are combined, adoption of this rulemaking might result in
approximately $170.29-$183.21 million in total net cost savings
(undiscounted). Again, we have not incorporated the findings of this
supplemental analysis into our primary analysis' findings because of
the substantial uncertainty that surrounds the extent of proof pressure
cylinder requalification testing. Please refer to the above section,
``Summary of preliminary findings,'' for the net cost savings estimates
of our primary analysis.
C. Executive Order 13771
This proposed rulemaking is expected to be an Executive Order 13771
deregulatory action. Details on the estimated cost savings of this
proposed rule can be found above in ``Section III.B. Execuitve Order
12866 and DOT Regulatory Policies and Procedures.''
D. Executive Order 13132
This rulemaking was analyzed in accordance with the principles and
criteria contained in Executive Order 13132 (``Federalism'') and the
President's memorandum (``Preemption'') that was published in the
Federal Register on May 22, 2009 [74 FR 24693]. Executive Order 13132
requires agencies to assure meaningful and timely input by State and
local officials in the development of regulatory policies that may have
``substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government.'' This
rulemaking will preempt State, local, and Tribal requirements but does
not propose any regulation that has substantial direct effects on the
States, the relationship between the national government and the
States, or the distribution of power and responsibilities among the
various levels of government. Therefore, the consultation and funding
requirements of Executive Order 13132 do not apply.
The Federal hazmat law, 49 U.S.C. 5101-5128, contains an express
preemption provision [49 U.S.C. 5125 (b)] that preempts State, local,
and Indian tribal requirements on the following subjects:
(1) The designation, description, and classification of hazardous
materials;
(2) The packing, repacking, handling, labeling, marking, and
placarding of hazardous materials;
(3) The preparation, execution, and use of shipping documents
related to hazardous materials and requirements related to the number,
contents, and placement of those documents;
(4) The written notification, recording, and reporting of the
unintentional release in transportation of hazardous material; and
(5) The design, manufacture, fabrication, marking, maintenance,
recondition, repair, or testing of a packaging or container
represented, marked, certified, or sold as qualified for use in
transporting hazardous material.
This proposed rule addresses covered subject item (5) above and
preempts State, local, and Indian tribe requirements not meeting the
``substantively the same'' standard. This proposed rule is necessary to
provide cost savings and regulatory flexibility to the propane
industry. If the proposed changes are not adopted, propane industry
members likely will incur substantial costs related to the accelerated
requalification schedule when using the volumetric expansion test.
PHMSA invites those with an interest in the issues presented in this
NPRM to comment on the effect the adoption of specific proposals may
have on State or local governments.
E. Executive Order 13175
This rulemaking was analyzed in accordance with the principles and
criteria contained in Executive Order
[[Page 38196]]
13175 (``Consultation and Coordination with Indian Tribal
Governments''). Executive Order 13175 requires agencies to assure
meaningful and timely input from Indian tribal government
representatives in the development of rules that significantly or
uniquely affect Tribal communities by imposing ``substantial direct
compliance costs'' or ``substantial direct effects'' on such
communities or the relationship and distribution of power between the
Federal Government and Indian tribes. This rulemaking does not have
tribal implications. Therefore, the funding and consultation
requirements of Executive Order 13175 do not apply.
However, we invite Indian tribal governments to provide comments on
the costs and effects that this or a future rulemaking could
potentially have on Tribal communities.
F. Regulatory Flexibility Act, Executive Order 13272, and DOT Policies
and Procedures
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
agencies to review regulations to assess their impact on a substantial
number of small entities unless the agency determines that a rulemaking
is not expected to have significant impact on a substantial number of
small entities. This proposed rule provides cost savings and regulatory
flexibility to the propane industry, as previously discussed. The
proposed changes are generally intended to provide relief to members of
the propane industry, including small entities, by easing requirements
with no anticipated reduction in safety.
Consideration of alternative proposals for small businesses. The
Regulatory Flexibility Act directs agencies to establish exceptions and
differing compliance standards for small businesses, where it is
possible to do so and still meet the objectives of applicable
regulatory statutes.
The impact of this proposed rule is not expected to be significant.
The proposed changes are generally intended to provide regulatory
flexibility and cost savings to industry members.
This proposed rule has been developed in accordance with Executive
Order 13272 (``Proper Consideration of Small Entities in Agency
Rulemaking'') and DOT's procedures and policies to promote compliance
with the Regulatory Flexibility Act to ensure that potential impacts of
draft rules on small entities are properly considered.
G. Paperwork Reduction Act
While this NPRM proposes to address the requalification of certain
DOT 4-series specification cylinders, we do not anticipate that it will
affect the burden for this or any other information collection. Under
the Paperwork Reduction Act of 1995, no person is required to respond
to any information collection unless it has been approved by OMB and
displays a valid OMB control number. Section 1320.8(d) of 5 CFR
requires that PHMSA provide interested members of the public and
affected agencies an opportunity to comment on information and
recordkeeping requests. PHMSA specifically solicits comment on the
information collection and recordkeeping burdens associated with
developing, implementing, and maintaining these proposed requirements.
Address written comments to the Dockets Unit as identified in the
ADDRESSES section of this rulemaking. We must receive comments
regarding information collection burdens prior to the close of the
comment period as identified in the DATES section of this rulemaking.
In addition, you may submit comments specifically related to the
information collection burden to the PHMSA Desk Officer, Office of
Management and Budget, at fax number 202-395-6974. Requests for a copy
of this information collection should be directed to Steven Andrews or
Shelby Geller, Standards and Rulemaking Division (PHH-10), Pipeline and
Hazardous Materials Safety Administration, 1200 New Jersey Avenue SE,
Washington, DC 20590-0001.
H. Regulation Identifier Number (RIN)
A regulation identifier number (RIN) is assigned to each regulatory
action listed in the Unified Agenda of Federal Regulations. The
Regulatory Information Service Center publishes the Unified Agenda in
April and October of each year. The RIN contained in the heading of
this document can be used to cross-reference this action with the
Unified Agenda.
I. Unfunded Mandates Reform Act
This rulemaking does not impose unfunded mandates under the
Unfunded Mandates Reform Act of 1995. It does not result in costs of
$155 million or more to either State, local, or Tribal governments, in
the aggregate, or to the private sector and is the least burdensome
alternative that achieves the objective of the rulemaking. Further, in
compliance with the Unfunded Mandates Reform Act of 1995, PHMSA will
evaluate any regulatory action that might be proposed in subsequent
stages of the proceeding to assess the effects on State, local, and
Tribal governments and the private sector.
J. Environmental Assessment
The National Environmental Policy Act of 1969 (NEPA) requires
Federal agencies to consider the consequences of major Federal actions
and prepare a detailed statement on actions significantly affecting the
quality of the human environment. The Council on Environmental Quality
(CEQ) implementing regulations (40 CFR part 1500) require Federal
agencies to conduct an environmental review considering (1) the need
for the action, (2) alternatives to the action, (3) probable
environmental impacts of the action and alternatives, and (4) the
agencies and persons consulted during the consideration process (see 40
CFR 1508.9(b)).
1. Need for the Action
The purpose of this NPRM is to amend the HMR through revisions to
the requalification period for certain DOT 4-series specification
cylinders in non-corrosive gas service. This proposed action is
intended to provide regulatory relief. If the changes in this proposed
rule are not adopted in the HMR, PHMSA would forgo the opportunity to
provide regulatory relief.
2. Alternatives Considered
Transportation of hazardous materials in commerce is subject to
requirements in the HMR, issued under authority of Federal hazmat law,
codified at 49 U.S.C. 5101 et seq. To facilitate the safe and efficient
transportation of hazardous materials in international commerce, the
HMR provide that both domestic and international shipment of hazardous
materials may be offered for transportation and transported under
provisions of the international regulations.
In proposing this rulemaking, PHMSA is considering the following
alternatives:
Alternative 1: No Action Alternative
The No Action Alternative does not incorporate the regulatory
changes proposed in this NPRM. If PHMSA were to select this
alternative, it would not proceed with any rulemaking on this subject
and the current regulatory standards would remain in effect. If the
current regulatory standards remain in effect, Sec. 108.209(e) would
not be amended, and the requalification period for volumetric expansion
and proof pressure testing would remain at a 10-year period. This
alternative would not address NPGA's petition for rulemaking. The
requalification period for the
[[Page 38197]]
volumetric expansion test would not be extended to a 12-year period and
the requalification period for the proof pressure test would not be
extended to an initial 12-year period followed by a 10-year period.
Alternative 2: Preferred Alternative
The Preferred Alternative is the current proposal as it appears in
the NPRM, applying to transportation of hazardous materials by various
modes (highway, rail, vessel, and aircraft). The proposed amendments
encompassed in this alternative are more fully addressed in the
preamble and regulatory text sections. However, the general amendment
in this NPRM is to revise the requalification period in Sec.
180.209(e) for DOT 4-series specification cylinders to allow for a 12-
year period for volumetric expansion testing and an initial 12-year
period followed by a 10-year requalification period for proof pressure
testing.
3. Environmental impacts
Alternative 1: No Action Alternative
If PHMSA were to select the No Action Alternative, current
regulations would remain in place and no new provisions would be added.
This alternative would not address NPGA's petition for rulemaking. The
current regulatory requirements, with shorter requalification intervals
for volumetric expansion testing, are more conservative and, assuming
100% compliance, there would be more opportunities to identify
cylinders with defects so that they could be repaired or removed from
service. The failure of a DOT 4B, 4BA, 4BW, or 4E specification
cylinder results in a large release of energy, which can result in
destruction to property, injury, and death. Nonetheless, PHMSA believes
that prior cylinder requalification intervals, both under HM-233F
standards and the standards prior to that change, were unnecessarily
burdensome.
Alternative 2: Preferred Alternative
PHMSA proposes that amending the requalification period for DOT 4-
series specification cylinders in non-corrosive gas service will result
in decreased regulatory and economic burden. PHMSA does not anticipate
that increased cylinder failures will occur because PHMSA believes that
prior standards were unnecessarily conservative. The proposed change
clarifies and broadens regulatory requalification periods, ensuring
consistency with training programs developed within the industry. There
are no anticipated significant impacts in the release of environmental
pollutants under either alternative. However, fewer trips transporting
cylinders for retest may result in minor reductions to air pollutants,
including greenhouse gases.
4. Agencies Consulted
PHMSA has coordinated with the Federal Aviation Administration, the
Federal Motor Carrier Safety Administration, the Federal Railroad
Administration, and the U.S. Coast Guard in the development of this
proposed rule. PHMSA will consider the views expressed in comments to
the NPRM submitted by members of the public, State and local
governments, and industry.
5. Conclusion
PHMSA proposes to find that no significant environmental impact
will result from this proposed rule. PHMSA welcomes any views, data, or
information related to safety or environmental impacts that may result
if the proposed requirements are adopted, as well as possible
alternatives and their environmental impacts.
K. Privacy Act
In accordance with 5 U.S.C. 553(c), DOT solicits comments from the
public to better inform its rulemaking process. DOT posts these
comments, without edit, including any personal information the
commenter provides, to http://www.regulations.gov, as described in the
system of records notice (DOT/ALL-14 FDMS), which can be reviewed at
http://www.dot.gov/privacy.
L. Executive Order 13609 and International Trade Analysis
Under Executive Order 13609, ``Promoting International Regulatory
Cooperation,'' agencies must consider whether the impacts associated
with significant variations between domestic and international
regulatory approaches are unnecessary or may impair the ability of
American business to export and compete internationally. See 77 FR
26413 (May 4, 2012). In meeting shared challenges involving health,
safety, labor, security, environmental, and other issues, international
regulatory cooperation can identify approaches that are at least as
protective as those that are or would be adopted in the absence of such
cooperation. International regulatory cooperation can also reduce,
eliminate, or prevent unnecessary differences in regulatory
requirements. This rulemaking does not impact international trade.
M. National Technology Transfer and Advancement Act
The National Technology Transfer and Advancement Act of 1995 (15
U.S.C. 272 note) directs Federal agencies to use voluntary consensus
standards in their regulatory activities unless doing so would be
inconsistent with applicable law or otherwise impractical. Voluntary
consensus standards are technical standards (e.g., specification of
materials, test methods, or performance requirements) that are
developed or adopted by voluntary consensus standards bodies. This
rulemaking makes revisions to the requalification periods for DOT 4-
series specification cylinder consistent with current Federal statute
and guidance and PHMSA policies and procedures; it does not involve use
of voluntary consensus standards.
N. Executive Order 13211
Executive Order 13211 (``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use'') [66 FR
28355; May 22, 2001] requires Federal agencies to prepare a Statement
of Energy Effects for any ``significant energy action.'' Under the
executive order, a ``significant energy action'' is defined as any
action by an agency (normally published in the Federal Register) that
promulgates, or is expected to lead to the promulgation of, a final
rule or regulation (including a notice of inquiry, ANPRM, and NPRM)
that (1)(i) is a significant regulatory action under Executive Order
12866 or any successor order and (ii) is likely to have a significant
adverse effect on the supply, distribution, or use of energy; or (2) is
designated by the Administrator of the Office of Information and
Regulatory Affairs as a significant energy action. PHMSA welcomes any
data or information related to energy impacts that may result from this
NPRM, as well as possible alternatives and their energy impacts. Please
describe the impacts and the basis for the comment.
List of Subjects in 49 CFR Part 180
Hazardous materials transportation, Motor carriers, Motor vehicle
safety, Packaging and containers, Railroad safety, Reporting and
recordkeeping requirements.
In consideration of the foregoing, PHMSA proposes to amend 49 CFR
chapter I as follows:
[[Page 38198]]
PART 180--CONTINUING QUALIFICATION AND MAINTENANCE OF PACKAGINGS
0
1. The authority citation for part 180 continues to read as follows:
Authority: 49 U.S.C. 5101-5128; 49 CFR 1.81 and 1.97.
0
2. In Sec. 180.209:
0
a. Revise Table 1--Requalification of Cylinders in paragraph (a); and
0
b. Revise paragraph (e).
The revisions read as follows.
Sec. 180.209 Requirements for requalification of specification
cylinders.
(a) * * *
Table 1--Requalification of Cylinders \1\
------------------------------------------------------------------------
Minimum test
Specification under which pressure (psig) Requalification
cylinder was made \2\ period (years)
------------------------------------------------------------------------
3............................... 3,000 psig........ 5.
3A, 3AA......................... 5/3 times service 5, 10, or 12 (see
pressure, except Sec.
non-corrosive 180.209(b), (f),
service (see Sec. (h), and (j)).
180.209(g)).
3AL............................. 5/3 times service 5 or 12 (see Sec.
pressure. 180.209(j) and
(m)\3\).
3AX, 3AAX....................... 5/3 times service 5.
pressure.
3B, 3BN......................... 2 times service 5 or 10 (see Sec.
pressure (see 180.209(f)).
Sec.
180.209(g)).
3E.............................. Test not required. ..................
3HT............................. 5/3 times service 3 (see Sec. Sec.
pressure. 180.209(k) and
180.213(c)).
3T.............................. 5/3 times service 5.
pressure.
4AA480.......................... 2 times service 5 or 10 (see Sec.
pressure (see 180.209(h)).
Sec.
180.209(g)).
4B, 4BA, 4BW, 4B-240ET.......... 2 times service 5, 7, 10, or 12
pressure, except (see Sec.
non-corrosive 180.209(e), (f),
service (see Sec. and (j)).
180.209(g)).
4D, 4DA, 4DS.................... 2 times service 5.
pressure.
4E.............................. 2 times service 5, 10, or 12 (See
pressure, except Sec.
non-corrosive 180.209(e)).
service (see Sec.
180.209(g)).
4L.............................. Test not required. ..................
8, 8AL.......................... .................. 10 or 20 (see Sec.
180.209(i)).
Exemption or special permit See current See current
cylinder. exemption or exemption or
special permit. special permit.
Foreign cylinder (see Sec. As marked on 5 (see Sec. Sec.
173.301(j) of this subchapter cylinder, but not 180.209(l) and
for restrictions on use). less than 5/3 of 180.213(d)(2)).
any service or
working pressure
marking.
------------------------------------------------------------------------
\1\ Any cylinder not exceeding 2 inches outside diameter and less than 2
feet in length is excepted from volumetric expansion test.
\2\ For cylinders not marked with a service pressure, see Sec.
173.301a(b) of this subchapter.
\3\ This provision does not apply to cylinders used for carbon dioxide,
fire extinguisher or other industrial gas service.
* * * * *
(e) Cylinders in non-corrosive gas service. A cylinder made in
conformance with DOT Specifications 4B, 4BA, 4BW, or 4E protected
externally by a suitable corrosion-resistant coating and used
exclusively for non-corrosive gas that is commercially free from
corroding components may be requalified by volumetric expansion testing
every 12 years instead of every 5 years. As an alternative, the
cylinder may be subjected to a proof pressure test at least two times
the marked service pressure, but this latter type of test must be
repeated every 10 years after expiration of the initial 12-year period.
When subjected to a proof pressure test, the cylinder must be carefully
examined under test pressure and removed from service if a leak or
defect is found.
* * * * *
Issued in Washington, DC, on July 31, 2019, under authority
delegated in 49 CFR 1.97.
William S. Schoonover,
Associate Administrator of Hazardous Materials Safety, Pipeline and
Hazardous Materials Safety Administration.
[FR Doc. 2019-16677 Filed 8-5-19; 8:45 am]
BILLING CODE 4910-60-P