Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect 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.

For the reasons discussed above, I certify this proposed regulation:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Would not affect intrastate aviation in Alaska, and

(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

Section 17.00(g)'s 80-character record format has been in place since 1986, 30 and has become outdated and difficult for staff to use. Historically, Part 17 has evolved alongside technological advances in data transmission. At the time of the Commission's establishment, daily reports with respect to special accounts could be submitted to the Commission on paper series '01 forms. 31 In 1984, the Commission amended Part 17 to permit, but not require, reporting firms to submit Part 17 reports on certain Commission-compatible data processing media—at that time, computer printouts or magnetic tape. 32 The Commission found these methods improved data quality and saved time, money, and effort for both the Commission and market participants. 33 In 1986, the Commission revised Part 17 to specifically require that a reporting firm submit reports in a machine-readable form compatible with the Commission's data processing system, unless otherwise authorized by the Commission. 34 At that time, newly-established § 17.00(g) set out the data fields to be reported and introduced an 80-character submission standard based on Cobol Programming Language descriptions. 35 Market participants were required to submit § 17.00(a) large trader position reports using compatible data processing media, defined to include magnetic tape, magnetic diskette, or dial-up data transmission at speeds up to 1200 baud asynchronous transmission and 4800 baud synchronous transmission. 36 The Commission made minor amendments to the particulars of the 80-character record format in 1997 and, in recognition of evolving data transmission methods, revised the definition of “compatible data-processing media” to delete its list of specific compatible media and delegate to staff the authority to define acceptable media. 37 The 80-character record format has remained largely unchanged since 1997. In 2004, the Commission revised requirements that specified that reports be transmitted by “dial-up” to allow for more general transmission via internet connection, 38 and expanded the requirement that reporting firms include information concerning volume attributable to exchanges of futures for physicals to include information concerning exchanges of futures for derivatives positions. 39

Technology for financial reporting has further advanced since the 1990s. As a result, the record format for § 17.00(a) large trader reports has become outdated.

First, the Cobol Language submission standard embedded in current § 17.00(g) is outdated. No other CFTC reporting regime relies in the same manner on a Cobol Language submission standard today. 40 Outside of the Part 17 context, the Commission has transitioned to more modern data submission standards, such as Financial Products Markup Language (“FpML”), 41 the Financial Information eXchange (“FIX”) Protocol or Financial Information eXchange Markup Language (“FIXML”), 42 and other submission standards using extensible markup language (“XML”). 43 XML standards have the ability to capture complex or customizable information about products  44 beyond the capabilities of the simpler Cobol Language used in the current § 17.00(g) standard. The Commission converted reporting for transaction data reporting by DCMs to an FIXML standard in the 2009 to 2010 period. 45 XML-based standards like FpML and FIXML both have been widely used by market participants and regulators to represent financial data for purposes of electronically messaging and confirming derivatives trades since at least 2011. 46

Second, the current § 17.00(g) record format has grown error-prone. Correcting errors in § 17.00(a) data is burdensome for both Commission staff and industry. Uncorrected errors in such data impair the Commission's ability to utilize data for surveillance and market analysis. In addition to relying on data reported under § 17.00(a) for market surveillance, the Commission generates the weekly COT report based on such data. 47 Because the current § 17.00(g) record format does not support automated data quality checks from the Commission back to reporting firms, Commission staff must manually contact reporting firms to address errors, which has proven time-consuming and inefficient. Reporting firms must, in turn, submit error corrections. This error correction process puts the timeliness of the COT report in jeopardy. The error correction process also imposes costs on the Commission and on industry that could be reduced or avoided if the Commission were able to implement automated data quality checks.

Third, data received in the § 17.00(g) record format is difficult to query outside of ISS, limiting staff's flexibility in working with this data and impeding staff's ability to integrate this data with other data housed outside of ISS.

Fourth, new contract features have been introduced to the market since the last revisions to § 17.00(g), including certain features which are in some cases not readily susceptible to representation in § 17.00(g)'s current 80-character record format. For example, the current § 17.00(g) submission standard contains a single data field that allows the reporting firm to indicate the strike for an option position, but cannot accommodate reporting strikes for a bounded option position—a position in a contract that has both an upper and lower strike—in that single data field. To accommodate data reporting for such contracts, the Commission must undertake additional manual work, including ingesting supplemental data reports. This is time-consuming, inefficient, and introduces unnecessary risks of error.

In light of the above, the Commission is proposing to amend Part 17 to (1) remove the outdated 80-character record format and replace it with provisions that delegate to staff the authority to designate a modern data submission standard, and (2) replace the data fields represented in the 80-character record format with an appendix of applicable data elements and a Part 17 Guidebook to provide the form and manner for submitting data reports. In introducing an appendix of applicable data elements, the Commission also proposes to add data elements necessary to represent positions in certain innovative contracts in § 17.00(a) reports and to indicate the types of transactions that resulted in day-to-day changes in positions as described below.

As discussed above, the current § 17.00(g) record format has become outdated, error-prone, and difficult to use. The Commission is proposing amendments to remove § 17.00(g)'s current, outdated 80-character record format and to replace it with provisions that allow the Commission to implement modern data submission standards. 48 Specifically, the Commission proposes to remove current § 17.00(g)'s 80-character record format and amend § 17.03(d) to delegate authority to the Director of the Office of Data and Technology to designate a submission standard for reports required under § 17.00(a). That submission standard would be published in a Part 17 Guidebook. The Commission proposes replacing current § 17.00(g) with a provision requiring that a report under § 17.00(a) include all applicable data elements specified in a proposed Appendix C to Part 17, and be submitted in the form and manner provided in the Part 17 Guidebook. Delegated authority would facilitate implementing a submission standard that accommodates technological advances and provides efficiencies to market participants required to submit reports required by § 17.00(a).

As discussed above, the current § 17.00(g) record format has become outdated. The Cobol Language submission standard is used nowhere else in CFTC reporting, as the Commission has otherwise transitioned to more modern data submission standards for data reporting across its reporting regulations. 49 That record format is also error-prone and difficult to query outside of ISS, rendering large trader position data difficult to integrate with other Commission data. And, that submission standard lacks the flexibility to accommodate certain features of innovative contracts.

To replace the current § 17.00(g) record format, the Commission proposes to revise §§ 17.00(g) and 17.03(d) to explicitly delegate authority to the Director of the Office of Data and Technology to determine the form and manner for reporting data required to be reported under § 17.00(a), including to establish the data submission standard for such reports. Concurrently with the issuance of this notice, the Office of Data and Technology has published a proposed Part 17 Guidebook on the Commission's website, https://www.cftc.gov. The proposed Part 17 Guidebook will specify the data submission standard for reports required under § 17.00(a), among other things. Such an approach is consistent with the Commission's practice in other data reporting regimes. 50 To facilitate adaptation to modern data standards, the Commission has delegated authority to the Divisions to determine which data standards to permit or require in order to accommodate the needs of different communities of users. 51 The Divisions exercise delegated authority through the publication of guidebooks or technical specifications that set out the form, manner, and timing for reporting data.

The proposed Part 17 Guidebook specifies that reporting firms submit § 17.00(a) data in FIXML format. In its other reporting regimes, the Commission typically requires modern XML submission standards, such as FpML  52 or FIXML. 53 Receiving Part 17 data in a modern submission format comparable to that used in the submission of other datasets the Commission relies on would enable staff to more easily analyze Part 17 data outside of ISS and to more easily integrate Part 17 data with other Commission datasets. Notably, the Commission receives Trade Capture Reports and Ownership and Control Reports in a FIXML format. 54 Section 17.00(a) position data can be linked to § 16.02 transaction data through ownership and control data required to be reported under § 17.01. 55 Receiving § 17.00(a) position data via FIXML and storing the same in ISS would facilitate linking ISS data to Trade Capture Report data stored in the Commission's Trade Surveillance System (“TSS”). Adopting an XML-based standard for large trader position reports required under § 17.00(a) should also improve data quality by reducing the rate of errors.

The Commission has previously recognized the importance of flexibility with respect to promulgating reporting submission standards to accommodate technological advances. For example, for Part 17 reporting, the Commission previously revised the definition of “compatible data-processing media” to remove enumeration of specific media in part because it was impractical to define the term by regulation since electronic media were evolving at such a rapid pace. 56 Elsewhere, for swaps large trader reporting under Part 20, the Commission delegated to staff the authority to provide instructions for and determine the format, coding structure, and electronic data transmission procedures for submitting data records in order to allow the Commission to respond to changing market and technological conditions for the purpose of ensuring timely and accurate data reporting. 57 Such an approach allows the Commission to consult with market participants and update reporting submission standards to remain consistent with industry best practices. 58

Amending §§ 17.00(g) and 17.03(d) to facilitate implementation of a modern data submission standard should also simplify reporting for reporting firms. Although updating submission standards will require technological changes for reporting firms, the Commission believes that eliminating the use of the unique § 17.00(g) record format and replacing it with a more commonly-used submission standard may result in more efficient reporting. Additionally, using a modern submission standard should facilitate automated data quality checks from the Commission back to reporting firms, which should reduce burdens associated with correcting data errors and the time necessary to complete the correction process. A more efficient error correction process will also, in turn, assist staff in timely generating the weekly COT report. The Commission invites comments on all aspects of the proposed Part 17 Guidebook in addition to comments on this notice of proposed rulemaking.

The Commission recognizes that reporting firms' technological capabilities may vary based on relative size and experience of a given reporting firm. For example, the Commission understands that today, although some firms have automated the process for creating reports required by § 17.00(a), other firms manually create those reports. Accordingly, the proposed Part 17 Guidebook offers two submission methods for § 17.00(a) data: (a) an XML-based, secure file transfer protocol (“FTP”) data feed, and (b) a web-based portal to ingest manual submissions. The Commission anticipates that such an approach will provide greater flexibility to reporting firms. Reporting firms may consider their existing data reporting infrastructure and the volume of reports they expect to submit, among other factors, when selecting their preferred submission method. The proposed Part 17 Guidebook provides detailed instructions for submitting under each method.

Current § 17.00(h) provides that, unless otherwise approved by the Commission or its designee, corrections of errors and omissions in data required to be reported under § 17.00(a) shall be filed on series '01 forms or in the format, coding structure and data transmission procedures approved in writing by the Commission or its designee. 59 Consistent with the Commission's proposal to revise Part 17 to modernize the reporting of data under § 17.00(a), the Commission proposes updating the submission standard for error corrections to mirror the submission standard for the data to be corrected.

Today, reporting firms submit error corrections using the current § 17.00(g) record format. 60 Upon receipt of a correction, staff replaces the original, erroneous record with the corrected record. Staff will employ a similar process to ingest error corrections following the proposed removal of the current § 17.00(g) record format, such that corrected and omitted data will be submitted using the new data submission standard published by the Office of Data and Technology in the proposed Part 17 Guidebook pursuant to delegated authority. 61

Currently, staff manually notifies reporting firms when it identifies errors in § 17.00(a) reports submitted by those firms. Following implementation of this proposal, the Commission expects to automate this process to notify reporting firms of errors on the same day erroneous reports are submitted. The Commission expects automating this process will facilitate more rapid corrections to reported data, which will improve the quality of the data used by Commission staff.

The Commission requests comments on all aspects of the proposed changes to regulations in Part 17, including proposed changes to §§ 17.00(a), 17.00(g) and 17.03(d). The Commission requests specific comment on the following:

(1) The advantages and disadvantages of the proposed Part 17 Guidebook requiring a FIXML submission standard for reports required under § 17.00(a), including with respect to data quality, implementation costs, and ongoing costs post-implementation.

(2) The proposal to permit reporting firms to submit § 17.00(a) large trader position reports through the Commission's web-based portal as an alternative to submission by secure FTP.

(3) The advantages and disadvantages of correcting errors in data required to be reported under § 17.00(a) in the manner provided in the proposed Part 17 Guidebook, including with respect to data quality, implementation costs, and ongoing costs post-implementation.

As discussed above, in order to facilitate implementation of a modern submission standard, the Commission proposes removing the record format set out in § 17.00(g). Removing that record format will remove the data fields as well. To replace the data fields proposed to be deleted from § 17.00(g), the Commission proposes to add an Appendix C to Part 17 specifying required data elements and defining those elements. Enumerating required data elements in an appendix is consistent with the approach taken for certain other Commission data reporting regulations. 62 In addition to retaining the data currently required to be reported under § 17.00(a), proposed Appendix C would provide revised definitions and add certain data elements not currently required by the § 17.00(g) record format.

The Commission is proposing to remove the definitions set out in current § 17.00(g)(2). The Commission is proposing to include related definitions in Appendix C, revised to remove language providing the form and manner for reporting data. Given that the current § 17.00(g) record format will be removed from the rule and updated guidance on the form and manner for reporting will be required, certain of the § 17.00(g)(2) definitions contain language that would become superfluous. For example, for the “Report Type” data element, the Commission is proposing not to include in Appendix C the portion of the definition that specifies that “[v]alid values” to submit include “RP” for reporting positions, “DN” for reporting notices, and “EP” for reporting exchanges of futures for a commodity or for a derivatives position. 63

Rather than specifying the form and manner for reporting the § 17.00(a) data elements in the rule, the Commission is proposing to delegate authority to determine the form and manner for reporting each data element to the Director of the Office of Data and Technology. To implement this delegation of authority, the Commission is proposing to amend § 17.03(d) to provide that the Director of the Office of Data and Technology would specify the form, manner, coding structure, and electronic data transmission procedures for reports and submissions under § 17.00(a). The proposed Part 17 Guidebook would set forth the form, manner, coding structure, and electronic data transmission procedures for reporting the data elements in proposed Appendix C to Part 17, and to determine whether to permit or require one or more particular data standards.

Providing form and manner requirements through a Part 17 Guidebook would bring the Part 17 framework in line with reporting under Parts 16, 20, 43, and 45, for which, rather than embedding technical reporting details into regulation text, the Commission has delegated authority to staff to set the form and manner for reporting outside of the regulation text through a published technical specification or guidebook. 64 Implementing form and manner requirements through a Part 17 Guidebook will facilitate the Commission's ability to respond to changing market conventions and technological conditions, to harmonize submission standards with those of other authorities, 65 and to accommodate the introduction of innovative products.

As discussed above, concurrently with the issuance of this notice, the Commission has published a proposed Part 17 Guidebook on its website, https://www.cftc.gov. Commenters are invited to comment on both the data submission standard in the proposed Part 17 Guidebook and on the data elements in proposed Appendix C.

The Commission requests comments on all aspects of the proposed Part 17 Guidebook published at the time of publication of this notice of proposed rulemaking.

Proposed Appendix C will maintain certain data elements included in the current § 17.00(g) record format, revise certain data elements included in the current § 17.00(g) record format, and add certain data elements not previously included in the § 17.00(g) record format. The proposed additional data elements capture information not captured by the current § 17.00(g) record format that is necessary to fulfill the Commission's surveillance and market analysis missions. The form and manner for reporting each of these data elements would be set forth in the proposed Part 17 Guidebook. The Commission invites comment on any of the data elements proposed in Appendix C. This section discusses these data elements below by category.

First, proposed Appendix C includes data elements currently captured by the fields in the current § 17.00(g) record format. In some instances, those data elements are revised to account for the introduction of a modern data submission standard. Second, proposed Appendix C includes data elements necessary to facilitate a modern, XML-based data submission standard, including data elements used to manage ingestion of data, such as “Total Message Count” and “Message Type.” Third, proposed Appendix C would add data elements necessary to capture product-identifying information not captured by the current record format, such as “Ticker Symbol” as well as certain data elements necessary to capture information to represent innovative contracts such as “bounded contracts,” options expiring to baskets of futures, and other novel contracts. The current record format does not allow reporting firms to represent all economically material terms of such contracts, and as a result the Commission is in some instances unable to determine whether certain special accounts carry positions in the same or different products. Fourth, proposed Appendix C would add data elements necessary to capture accurate information concerning changes in positions of special accounts that is not available in current § 17.00(a) large trader reporting but would benefit the Commission's surveillance programs and market analysis.

Proposed Appendix C retains data elements capturing certain of the information currently captured by § 17.00(g)'s 80-character record format. 66 The 80-character record format captures certain information necessary to process data, 67 information concerning the reporting firm and special account, 68 product-identifying information, 69 and information concerning the direction or nature of the trades underlying the position. 70

Proposed Appendix C calls for certain of this information in a different format than currently provided. For example, whereas the current § 17.00(g) record format captures information concerning whether a position is long or short in a single field, proposed Appendix C would capture long and short positions using separate data elements (“Long Position” and “Short Position”). Similarly, whereas the current § 17.00(g) record format identifies exchanges of futures for related positions using a single “Report type” field, proposed Appendix C would capture information concerning such exchanges in greater granularity through several data elements. As discussed further below, this greater granularity will facilitate Commission market surveillance and analysis programs.

Proposed Appendix C calls for certain data elements to facilitate processing of data. 71 Such data elements generally do not correspond to analogous data elements in § 17.00(g)'s record format. These include data elements concerning the submission of messages to the Commission, data elements identifying the sender and special account controller, and data elements identifying the date and time of the report. This information is necessary to enable the Commission to track and manage reports received using an XML submission standard.

The “Special Account Controller LEI” data element captures the legal entity identifier (“LEI”) of the account controller. An LEI is a unique code assigned to an entity in accordance with the standards set by the Global Legal Identifier System. 72 The “Special Account Controller LEI” data element would allow the Commission to link data reports submitted under § 17.00(a) with other data reports concerning the same counterparty. The Commission notes that not all special account controllers possess a legal entity identifier, or “LEI.” Some special account controllers may be ineligible to receive an LEI. For example, it is highly likely that a natural person who controls a special account would be unable to obtain an LEI. 73 For clarity, the Commission expects the “Special Account Controller LEI” data element will be conditional—an LEI must be reported for special accounts for which the special account controller is eligible to receive an LEI, but an LEI need not be reported for special accounts for which the special account controller is ineligible for an LEI. For such accounts, the Commission will receive identifying information via Form 102A.

Proposed Appendix C calls for reporting of certain data elements that, where applicable, are necessary to identify and distinguish the futures or option contract pertaining to the reported position. Specifically, additional data elements are necessary to draw more granular distinctions between certain contracts for reportable positions, 74 to accommodate reporting of positions in bounded or barrier contracts, 75 to accommodate reporting of positions in contracts with non-price or non-numeric strikes, 76 and to accommodate reporting of positions in other innovative contracts. 77

Distinguishing Products. Certain additional fields are necessary to precisely identify the product for a reported position. When § 17.00(g) was promulgated and revised in the 1980s and 1990s, exchanges listed a less diverse array of futures and options contracts than those available today. More granular data is required to distinguish among products in today's futures and options markets. Section 17.00(g)'s current record format allows the Commission to identify the product for a given position based on a combination of data points that indicate whether the product is a futures or option contract and identify the underlying commodity. That record format, however, is limited. For example, that record format allows the Commission to identify the underlying commodity through a “Commodity Code” field, which is populated with an exchange-assigned code corresponding to a relevant underlier. 78 However, the “Commodity Code” field does not currently enable the Commission to draw more granular distinctions between products that reference the same commodity but have material differences. A proposed “Product Type” field would allow the Commission to differentiate between futures and options contracts that use the same “Commodity Code” without separately relying on other reported fields, which may be insufficient to adequately distinguish between products in some instances. 79 A proposed “Ticker Symbol” field would provide the Commission with the published ticker symbol associated with the product on the listing contract market. 80 Proposed Appendix C would provide for “Maturity Month Year” and “Underlying Maturity Month Year” data elements, where applicable, to be populated with a specific day when necessary to characterize a product. 81 Similarly, a “Maturity Time” data element, where applicable, would be populated with the expiration time of an option or last trading time of a future for contracts that have multiple expiration times within a single day. A “Listing Date” data element, where applicable, would be populated with the listing date for options that had early expirations and were relisted with identical strikes and expirations, allowing the Commission to distinguish between tranches of closely related contracts. Absent such a field, different tranches of certain options contracts might be indistinguishable in ISS. 82 An “Earliest Exercise Date” data element would provide, where applicable, the date when American or Bermuda options  83 may be exercised, which would assist the Commission in identifying more complex positions.

Bounded or Barrier Contracts. Certain of these data elements are necessary to accurately report “bounded”  84 or “barrier”  85 contracts, including “Cap Level,” “Floor Level,” and “Bound or Barrier Level,” as the current § 17.00(g) record format does not accommodate this information. A “Bound or Barrier Type” data element would be necessary to identify the behavior of a product when it hits a bound or barrier, including to distinguish between “knock-in,” “knock-out,” and capped products. 86 Receiving data sufficient to understand the economics of bounded and barrier contracts would, among other things, support the Commission's surveillance program. Position data that more completely reflects the economics of positions in bounded or barrier options would provide the Commission with greater insight into, for example, potential cross-market manipulation. Where a bounded or barrier contract references the price or value of a contract or commodity listed in another market, a manipulative trader may trade in that other market for the purpose of influencing the price or value of that contract in order to hit or avoid a bound or barrier for an options position held in the first market.

To obtain comprehensive data concerning positions in bounded and barrier contract and certain binary option contracts based on the occurrence or non-occurrence of a specified event, proposed Appendix C also includes “Payout Amount” and “Payout Type” data elements. The proposed “Payout Amount” data element is intended to capture a cash amount of the payout associated with a product where that amount may not otherwise be determined based on reported data. The proposed “Payout Type” data element would allow the Commission to distinguish between vanilla, capped, binary, and other options that use the same Commodity Clearing Code.

Non-Price and Non-Numeric Strike Levels. Certain of the data elements in Proposed Appendix C are necessary to accurately capture information for options contracts that contain non-price and non-numeric strike levels. Specifically, § 17.00(g)'s record format's “Strike Price” field would be converted to two separate data elements: “Strike Level” and “Alpha Strike.” These data elements, respectively, would accommodate reporting of certain listed options contracts with non-monetary threshold levels and non-numeric threshold levels. For example, a binary option with U.S. Gross Domestic Product (“GDP”) as an underlier would have a non-price strike—a GDP figure. Other contracts that incorporate the occurrence or non-occurrence of a specified event as an underlier might specify as strikes non-numeric units, which would more appropriately be reported as a strike “value,” or “Alpha Strike.” For example, a binary option with different categories of hurricane landfalls as strike values might include as “Alpha Strikes” different categories of hurricane—for example, “Category 1 or higher” or “Category 2 or higher.”

Product-Specific Terms. To account for the likelihood that exchanges will introduce contracts that include novel features, proposed Appendix C includes a “Product-Specific Terms” data element. For innovative contracts, this data element would be populated with data reflecting economically material terms of contracts are not otherwise able to be represented in the proposed Appendix C data elements. The data element would not require reporting of any information that is not already separately recorded by a DCM for recordkeeping purposes. Future editions of the proposed Part 17 Guidebook would specify the form and manner of reporting positions in products subject to reporting that includes the “Product-Specific Terms” data element.

Reporting under this data element—as well as certain other data elements designed to represent particular products, such as the aforementioned fields designed to capture terms of bounded and barrier contracts—would only be required to be reported for contracts that cannot otherwise be represented in Part 17 reporting. Put differently, for reporting firms that facilitate trading or clearing of contracts that can be adequately represented in the other data elements in the proposed Part 17 Guidebook, reporting data pursuant to the “Product-Specific Terms” data element would not be required. Reporting firms that do become involved in trading futures and options contracts for which economically material terms are not otherwise reportable under § 17.00(a) may be required to report such data. Pursuant to the proposed rule, the Director of the Office of Data and Technology would have delegated authority to publish the form and manner of any product-specific terms required to be reported pursuant to this proposed data element.

Proposed Appendix C would add data elements necessary to capture accurate information regarding changes in positions that is not fully-captured by the current § 17.00(g) record format. 87 Understanding the nature and quantity of transactions that resulted in day-to-day changes in positions of special accounts will provide Commission staff with additional information for surveillance purposes, and will allow Commission staff to link position data reported at the special account level pursuant to § 17.00(a) with transaction data reported at the trading account level under § 16.02. 88 Additionally, information identifying the nature and quantity of transactions that resulted in day-to-day changes in positions of special accounts should provide reporting firms with an additional tool to perform an internal consistency review on data reported under § 17.00(a), and therefore enhance data quality.

Changes in positions are generally effected by buying and selling contracts; the expiration or settlement of contracts, which may result in assignments of contracts; or off-exchange transactions, such as block-trades, exchanges of derivatives for related positions (“EDRPs”), and transfers. Although the current § 17.00(g) record format requires reporting of the aggregate of certain EDRPs each day and the total delivery notices issued and stopped via the “Report Type” and “Long-Buy-Stopped (Short-Sell-Issued)”  89 fields, it otherwise does not capture data concerning changes in position. Proposed Appendix C would include data elements necessary to capture this information, as follows.

Contracts Bought and Sold. Proposed Appendix C includes data elements to capture “Contracts Bought” and “Contracts Sold.” The current § 17.00(g) record format captures aggregate positions, but does not reflect the amount of buying and selling associated with a particular special account. Obtaining reliable and accurate counts of gross buys and sells associated with a special account would enhance the Commission's ability to differentiate between large position holders that appear passive and large position holders that also trade in significant quantities of contracts daily.

In addition to contracts bought and sold on-exchange, contracts bought or sold via block trades are included in the sums reported as “Contracts Bought” and “Contracts Sold.” The Commission also expects that contracts acquired through give-ups  90 and allocations will be included in the totals of “Contracts Bought” and “Contracts Sold,” as such contracts would be treated as positions in the carrying accounts through which they are ultimately cleared rather than positions in the accounts that execute the transactions, if such accounts differ from the accounts through which such transactions are cleared.

Exchanges of Derivatives for Related Positions (EDRPs). A DCM's rules may authorize, for bona fide business purposes, privately-negotiated exchanges of derivatives for related positions, or “EDRPs.”  91 As discussed, the current § 17.00(g) record format requires reporting of aggregate EDRPs, but does not provide more granular data necessary to understand whether a position was exchanged for a physical commodity (exchanges for physical, or “EFPs”), exchanged for a swap or other derivative (exchanges for swaps, or “EFSs,” sometimes referred to as exchanges for risk, or “EFRs”), exchanged for an option, or exchanged for some other related position. Proposed Appendix C includes an “Exchanges of Derivatives for Related Positions” data element that is defined to require reporting firms to disaggregate EDRP transactions by type of EDRP in the form and manner for reporting set forth in the proposed Part 17 Guidebook. The proposed Part 17 Guidebook requires reporting firms to disaggregate reporting of EDRPs into EFPs bought and sold, EFSs bought and sold, and exchanges of options for option (“EOOs”) bought and sold. 92

This would also effect an update to a record format devised largely during the 1970s and 1980s, before EDRPs other than EFPs were commonly used. 93 EFSs, for example, were not explicitly authorized under the CEA until 2000, years after the initial § 17.00(g) record format had been promulgated. 94 In 2004, when the Commission amended the § 17.00(g) record format to require reporting of EDRPs generally, including EFSs, rather than just EFPs, it did not require reporting firms to distinguish among these different types of transactions, but rather required that such reporting group together all EFPs, EFSs, EFRs, EFOs  95 or other exchanges of futures for a commodity or for a derivatives position permitted by exchange rules, and report the sum under the same category. 96 At the time, the Commission found this to be “an appropriate approach because all of these trades are similar in that they permit the exchange of a futures position for an off-exchange position.”  97 The Commission now, based on experience surveilling EDRP practices in futures and options markets, proposes to require more granular differentiation in reporting of different types of EDRPs. More granular differentiation between the types of off-exchange transactions that effect changes in positions will provide a better understanding of the methods by which traders exit and enter positions. In particular, disaggregated EDRP data allows staff to confirm market integrity when there are concerns about a potential squeeze or other matters near the expiration of the physical delivery contract.

Expirations and Settlement of Contracts. In addition to EDRP counts and counts of contracts bought and sold, proposed Appendix C would add data elements necessary to capture expirations and settlements, including whether options were exercised and contracts assigned. Proposed Appendix C would capture such information in “Delivery Notices Stopped,” “Delivery Notices Issued,” “Long Options Expired,” “Short Options Expired,” “Long Options Exercised,” “Short Options Exercised,” “Long Futures Assigned,” and “Short Futures Assigned” data elements. The current § 17.00(g) record format captures information concerning delivery notices stopped and issued, but does not capture information concerning changes in positions due to option expirations and exercises.

Transfers. The Commission also proposes to include “Long Transfers Sent,” “Long Transfers Received,” “Short Transfers Sent,” and “Short Transfers Received” data elements to capture transfers of contracts that effect a change in position in a special account. This information is not directly captured by the current § 17.00(g) record format.

Internal Consistency Check for Data Concerning Changes in Position. The inclusion in reports required under § 17.00(a) of data elements reflecting counts of transactions that resulted in day-to-day changes in positions would enable reporting firms to perform internal consistency checks on position reports before submitting those reports. Specifically, the day-to-day change in the size of a position for a particular special account should equal the net value of contracts bought and sold, EDRPs bought and sold, expirations and assignments of contracts, and transfers.

The Commission requests comment on all aspects of proposed Appendix C, including the proposed data elements enumerated therein. The Commission requests specific comment on the following:

(4) Are there any data elements not included in proposed Appendix C that commenters believe are necessary to obtain a complete and accurate picture of positions held by large traders? If so, please identify such data elements.

(5) Are there any transactions that would effect changes in positions that are not accounted for by the Data Elements discussed in Section II.B.2.d above? If so, please identify such transactions.

(6) Are there any data elements proposed to be added in Appendix C that commenters believe are not necessary to obtain a complete and accurate picture of positions held by large traders? If so, please identify such data elements and explain why.

The Commission understands that market participants would require sufficient time to revise or build infrastructure to submit data required under § 17.00 using the proposed new submission standard. In addition, given that proposed Appendix C would require the submission of additional data elements beyond the information required by the current § 17.00(g) record format, the Commission understands that reporting firms may need to make additional adjustments to reporting systems.

The Commission expects that the compliance date for the rules proposed herein would be 365 days following publication of a final rule in the Federal Register .

The Commission also expects to permit reporting firms to begin reporting under the proposed new regime for § 17.00(a) reports in advance of the compliance date, while continuing to permit reporting firms to report under the current § 17.00(g) record format. The Commission believes that this approach will allow early adopters to realize the advantages of reporting using a modern data submission standard while allowing slower adopters sufficient time to modify and test reporting systems.

The Commission requests comment on all aspects of the proposed compliance date. The Commission requests specific comment on the following:

(7) Is the proposed compliance date of 365 days after publication of a final rule in the Federal Register an appropriate amount of time for compliance? If not, please propose an alternative timeline and provide reasons supporting that alternative timeline.

Section 15(a)  98 of the CEA requires the Commission to consider the costs and benefits of its actions before issuing a new regulation or order under the CEA. By its terms, section 15(a) does not require the Commission to quantify the costs and benefits of a new rule or to determine whether the benefits of the adopted rule outweigh its costs. Rather, section 15(a) requires the Commission to “consider the costs and benefits” of a subject rule. Section 15(a) further specifies that the costs and benefits of proposed rules shall be evaluated in light of five broad areas of market and public concern: (1) Protection of market participants and the public; (2) efficiency, competitiveness, and financial integrity of futures markets; (3) price discovery; (4) sound risk management practices; and (5) other public interest considerations. In conducting its analysis, the Commission may, in its discretion, give greater weight to any one of the five enumerated areas of concern and may determine that, notwithstanding its costs, a particular rule is necessary or appropriate to protect the public interest or to effectuate any of the provisions or to accomplish any of the purposes of the Act.

Although the Commission believes the proposed amendments would create meaningful benefits for market participants and the public, the Commission also recognizes that the proposed amendments would impose costs. The Commission has endeavored to enumerate these costs and, when possible, assign a quantitative value to the costs reporting entities might face given the proposed changes. Where it is not possible to reasonably quantify costs and benefits of the proposed amendments, those costs and benefits are discussed qualitatively.

The data required to be reported under § 17.00(a) comprise core data used by many divisions within the Commission, including the Division of Market Oversight (“DMO”), the Office of the Chief Economist (“OCE”), and the Division of Enforcement (“DOE”). In addition, § 17.00(a) submissions are collated to produce the database from which public COT reports are created. COT reports are used by news media, researchers, academics, and industry professionals to describe current trends in futures trading, conduct analysis of past trading patterns, and inform current market strategies. The current § 17.00(g) record format, which instructs reporting firms to submit data in an 80-character, Cobol-based format, has been in effect since 1986 and was last revised in 2004. 99 This current format limits the amount of descriptive data that can be included in any given field. This limits the Commission's ability to capture the economic characteristics of certain products in § 17.00(a) position reports and, in some instances, prevents the Commission from distinguishing a position in one contract from a position in another contract. In addition, the current reporting fields do not allow for the granular reporting of EDRPs, of certain futures and options contracts, and for complete information reflecting day-to-day changes in position.

The costs and benefits considered herein use as a baseline the reporting provided by reporting firms under current Part 17 regulations. In particular, entities are currently required to report positions for special accounts  100 by 9 a.m. on the business day following the trading day  101 and to correct errors as they are found by either the Commission or the reporting entity. 102 These elements of the rule would not change under the new reporting requirements.

The Commission notes that this cost-benefit consideration is based on its understanding that the derivatives market regulated by the Commission functions internationally with: (1) transactions that involve U.S. entities occurring across different international jurisdictions; (2) some entities organized outside of the United States that are registered with the Commission; and (3) some entities that typically operate both within and outside the United States and that follow substantially similar business practices wherever located. Where the Commission does not specifically refer to matters of location, the discussion of costs and benefits below refers to the effects of the proposed regulations on all relevant derivatives activity, whether based on their actual occurrence in the United States or on their connection with, or effect on U.S. commerce. 103

The Commission proposes two categories of amendments to Part 17. First, the Commission proposes to remove current § 17.00(g)'s 80-character record format and amend § 17.03(d) to delegate authority to the Director of the Office of Data and Technology to designate a submission standard for reports required under § 17.00(a). That submission standard would be published in a Part 17 Guidebook, to be published on the Commission's website. The proposed Part 17 Guidebook designates a modern XML submission standard for submitting reports required under § 17.00(a). Second, the Commission proposes adding an Appendix C to Part 17 enumerating data elements to be included in § 17.00(a) reports. The proposed data elements consist of (1) certain data elements currently required to be reported under § 17.00(g), (2) certain data elements necessary for processing files submitted in XML, (3) certain data elements necessary to represent innovative contracts that cannot currently be represented using the § 17.00(g) format, and (4) data elements necessary to understand the transactions that resulted in day-to-day changes in positions of large traders. The form and manner for reporting these data elements in proposed Appendix C would be provided in the Part 17 Guidebook.

Currently, reporting firms submit § 17.00(a) position reports using § 17.00(g)'s 80-character record format. The proposed amendments would require such reports to be submitted using a submission standard, which would be designated in a Part 17 Guidebook published by the Office of Data and Technology on the Commission's website. The proposed Part 17 Guidebook would require such submissions to be made using an XML format similar to that used in other reporting required by the Commission, including Trade Capture Reports submitted pursuant to § 16.02 and swap data reports submitted to swap data repositories pursuant to Part 43 and Part 45. 104 In order to collect and transmit these reports to the Commission, reporting firms would have to modify the systems they currently use to report Part 17 data.

The Commission estimates there are currently over 300 reporting firms submitting 17.00(a) reports. Reporting firms are divided between DCMs, FCMs, clearing members, and foreign brokers, including some firms that are registered under multiple categories. Over a 30-day period in early 2023 there were 310 reporting firms submitting § 17.00(a) reports. The Commission estimates that approximately 74 of these reporting firms automate the creation of § 17.00(a) reports and 236 of these firms create and submit § 17.00(a) reports manually. The Commission believes that reporting firms that currently automate the creation of § 17.00(a) reports will continue to do so and will submit such reports by secure FTP, and that reporting firms that currently manually create § 17.00(a) reports will continue these practices rather than modifying their systems to facilitate reporting by secure FTP. Firms that currently manually create § 17.00(a) reports may need to update systems used to manually generate those reports.

The proposed revisions concerning the data submission standard will facilitate more rapid data ingestion for the Commission and increased automation in ingesting data required to be reported under § 17.00(a), which will reduce staff time devoted to data ingestion.

The proposed revisions concerning the data submission standard should also enhance data quality. First, a modern data submission standard should be less error-prone than the current § 17.00(g) record format. Second, a modern data submission standard should facilitate automated, real-time error correction notifications, which will reduce the amount of manual staff intervention in the error correction process and should provide reporting firms with more efficient timelines for correcting errors. By improving data quality and enabling more rapid corrections of errors, the proposed revisions concerning the data submission standard should ensure the timeliness of COT reports.

The proposed revisions concerning the data submission standard should simplify the error correction process for reporting firms by automating and accelerating feedback concerning errors.

The proposed revisions concerning the data submission standard should enhance DMO's ability to monitor the markets, support DOE's surveillance program, and facilitate OCE research projects.

The Commission believes that the changes proposed to Part 17 would cause reporting firms to modify their systems to collect and submit data using a new data submission standard. The cost of such modifications is likely to vary from entity to entity. Under the proposed Part 17 Guidebook, reporting firms would submit reports required under § 17.00(a) using an XML submission standard.

The Commission expects more sophisticated reporting firms that submit a substantial number of daily reports, such as FCMs, will build systems to report using the XML submission standard designated in the proposed Part 17 Guidebook, and will arrange to automate daily submissions using a secure FTP data feed. The Commission estimates that 74 entities will submit reports in in this manner. The Commission estimates those entities would incur a one-time initial cost of approximately $29,800 for each entity (200 hours × $149/hour) to modify and test their systems, or an estimated aggregate dollar cost of $2,205,200 (74 entities × $29,800). 105 The Commission understands that some reporting firms today submit reports required under § 17.00(a) manually through the CFTC Portal, and believes that many of those firms would continue to do so under the new submission standard. The Commission estimates that 236 entities would continue to manually report through the CFTC Portal and would incur a one-time initial cost of approximately $1,310 to update their systems (10 hours × $131/hour) for each entity, or an estimated aggregate dollar cost of $309,160 (236 entities × $1,310). 106

On an ongoing basis, the Commission believes that the 310 estimated reporting firms would incur minimal additional costs above the baseline once setup is complete. However, the Commission estimates that approximately 74 entities filing using secure FTP may incur an ongoing operation and maintenance cost of $3,576 per year (2 hours per month × $149 per hour) per entity to maintain their systems, or an estimated aggregate annual cost of $264,624 (74 entities × $3,756). In addition, the Commission estimates that 236 entities filing manually would incur ongoing additional costs of $3,144 per year (2 hours per month × $131 per hour) per entity to maintain their systems, or an estimated aggregate annual cost of $741,984 (236 entities × $3,144). However, the Commission believes that costs associated with correcting errors would be reduced due to improved data validation at the time of ingest.

These cost estimates are based on a number of assumptions and cover a number of tasks required by reporting firms to design, test, and implement an updated data system based on an XML submission standard. These tasks include defining requirements, developing an extraction query, developing an interim extraction format (such as a CSV, or “comma-separated values,” file), developing validations, developing formatting conversions, developing a framework to execute tasks on a repeatable basis, and finally, integration and testing.

The Commission requests comment on the range of costs reporting markets, FCMs, clearing members, and foreign brokers would incur to implement an XML submission standard to comply with the proposed amendments. Are there additional costs or benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of these benefits.

As detailed above, the current 80-character § 17.00(g) format does not allow for flexibility in the reporting of certain types of futures, such as bounded futures, and options, such as capped or barrier options. The proposed amendments would enable these products to be identified in § 17.00(a) reports, and would capture additional information reflecting changes in position, including reporting concerning numbers of transfers, reporting of numbers of expirations of contracts, and more granular reporting of EDRPs, including specifying the type of related product (physical, swap, or option). Additionally, the expanded reporting regime instills flexibility such that the proposed Part 17 Guidebook can facilitate reporting of positions in products with innovative features.

The proposed additional fields necessary to identify certain contracts will facilitate collection of more robust market information for the Commission, including allowing the Commission to distinguish between positions in different contracts that may not currently be distinguishable. The proposed additional fields necessary to identify changes in positions, including more granular information concerning types of EDRPs, would also allow the Commission to collect better market information. Additionally, obtaining accurate, granular information concerning daily changes in position should improve data quality. These data elements will enable reporting firms to perform an internal consistency check to confirm the accuracy of data, which should reduce reporting errors.

Obtaining accurate, granular information concerning daily changes in position would also support the Commission's surveillance and monitoring programs. This data would provide the Commission with a more comprehensive understanding concerning the nature of changes in positions—as opposed to merely understanding the scope of positions—and should further facilitate linking position data reported under § 17.00(a)  107 with transaction data reporting under § 16.02. 108

The proposed amendments will require reporting firms to report certain additional data elements to the Commission beyond those elements required by the current § 17.00(g) record format.

CFTC staff experienced in designing data reporting, ingestion, and validation systems, estimate that for the 74 reporting firms that automate reporting through a secure file transfer protocol, the process of upgrading and testing systems to collect and report new fields will require them to incur on average 400 hours to update, test, and implement the proposed additional data elements required by proposed Appendix C, for a total of 29,600 hours across all FTP filers at an hourly wage rate of $149. This would amount to total capital and start-up costs of $4,410,400 across all FTP filers (400 hours × 74 FTP filers × $149 = $4,410,400). In addition, the Commission estimates that these firms may each incur one-time costs of up to $1,000 for equipment modifications associated with these changes.

The Commission estimates that the 236 reporting firms that manually input data required to be reported under § 17.00(a) into the CFTC Portal will incur on average 20 hours to implement additional data elements required by proposed Appendix C, or 4,720 total hours across all manual filers, at an hourly wage rate of $131 per hour. The Commission estimates that in the aggregate manual filers will incur total capital and start-up costs associated with updating, testing and implementing new data elements of $618,320 (4,720 hours × $131/hour).

On an ongoing basis, there would be minimal additional costs related to the addition of new data elements, since reporting entities would not be required to submit substantially more information than the baseline. For example, the Commission does not believe that the proposed amendments are likely to affect the overall number of reports submitted annually under § 17.00(a). However, given the additional data elements required by the proposed amendments, the Commission estimates that 74 entities who automate their reporting systems may each incur an ongoing operation and maintenance cost of $3,576 per year (2 hours per month × $149 per hour) per entity, or an estimated aggregate annual cost of $264,624 (74 entities × $3,576) related to implementation of the new data elements. In addition, the Commission estimates that 236 firms that manually file reports may incur ongoing operation and maintenance costs of $3,144 per year (2 hours per month × $131 per hour) per entity as a result of implementing the proposed amendments implementing new data elements, or an estimated aggregate annual cost of $741,984 (236 entities × $3,144).

These cost estimates are based on a number of assumptions and cover a number of tasks required by the reporting firms to design, test, and implement an updated data system based on an XML format. These tasks include defining requirements, developing an extraction query, developing an interim extraction format (such as a CSV, or “comma-separated values,” file), developing validations, developing formatting conversions, developing a framework to execute tasks on a repeatable basis, and finally, integration and testing.

Additionally, these costs may be mitigated because certain of the proposed data elements are conditional and will only be applicable to a small subset of the reporting firms. For example, if a particular FCM is not a participant on an exchange that lists “bounded” or “barrier” contracts, that FCM will not be required to report proposed data elements that are conditional and only applicable to positions in “bounded” or “barrier” contracts.

The Commission requests comment on the range of costs reporting markets, FCMs, clearing members, and foreign brokers would incur to report the data elements described in the proposed amendments. Are there additional costs or benefits that the Commission should consider? Are there any data elements proposed to be added in Appendix C that commenters believe would be unduly onerous or burdensome to report pursuant to part 17? If so, please identify such data elements and explain why. Commenters are encouraged to include both qualitative and quantitative assessments of these benefits. Specific areas of interest include the following: the necessity of collecting additional fields in order to obtain a complete view of futures and options positions across all markets; (ii) evaluations of the accuracy of the Commission's estimate of the burden of the proposed information reporting; (iii) determining whether there are ways to enhance the utility of reported information; and (iv) minimizing the burden of additional data collection to reporting entities.

CEA Section 15(a)  109 requires the Commission to consider the costs and benefits of the proposed amendments to Part 17 with respect to the following factors: (1) Protection of market participants and the public; (2) efficiency, competitiveness, and financial integrity of futures markets; (3) price discovery; (4) sound risk management practices; and (5) other public interest considerations. A discussion of these proposed amendments in light of the CEA Section 15(a) factors is set out immediately below.

The Commission expects that the changes to Part 17 reporting will lead to improvements in the Commission's ability to collect data on large traders. The Commission expects better validation of data at ingest, leading to more efficient error corrections compared to the old reporting format. The Commission expects these enhancements would occur without sacrificing the Commission's ability to perform comprehensive oversight of the market.

Additionally, reducing the risk of errors and delays in the publication of the COT report would benefit the public by providing more accurate data on positions held by large traders.

Furthermore, higher-quality and more granular position data from large traders would improve the Commission's oversight and enforcement capabilities and, in turn, would aid the Commission in protecting markets, participants, and the public in general.

The Commission believes the proposed amendments would improve the accuracy and completeness of futures and options position data available to the Commission by improving data quality and providing Commission staff with a more complete understanding of the products comprising certain positions. In particular, the proposed rule would allow for more complete reporting of EDRPs and complex futures and options positions. Access to more accurate and complete data would in turn assist the Commission with, among other things, evaluating if certain traders are in violation of position limits, monitoring concentrations of risk exposures, and preventing fraud and market manipulation. In addition, as described above, the proposed amendments are expected to improve the efficiency of data reporting and analysis by reducing the number of reporting errors and automating data validity and error corrections processes.

The Commission does not believe the proposed rules would have a significant impact on price discovery.

The Commission believes the proposed rule changes would improve the data quality associated with futures and options position reporting required under § 17.00(a). The proposed additional data elements would capture more complete product information for certain positions and more complete information concerning changes in position would provide the Commission with an expanded view of the marketplace that would enable the Commission to more effectively identify disruptive or manipulative trading activity. These improvements in the reporting would allow the Commission to evaluate risk throughout the futures and related markets.

The Commission does not believe that the costs arising from the proposed rules would threaten the ability of market participants to manage risks.

The Commission believes that the increased reliability and detail resulting from improvements to data reporting would further other public interest considerations, including transparency in the futures market to the public and detection of fraud or manipulation. Additionally, the reporting structure would provide additional flexibility to collect information on new products developed by exchanges, thereby allowing for those exchanges to innovate and respond to the demands of the marketplace while still providing traders' positions to the Commission.

The Commission generally requests comment on all aspects of its cost-benefit considerations, including the identification and assessment of any costs and benefits not discussed herein; data and any other information to assist or otherwise inform the Commission's ability to quantify or qualitatively describe the costs and benefits of the proposed amendments; and substantiating data, statistics, and any other information to support positions posited by commenters with respect to the Commission's discussion. The Commission welcomes comment on such costs, particularly from existing reporting firms that can provide quantitative cost data based on their respective experiences. Commenters may also suggest other alternatives to the proposed approach.

The Regulatory Flexibility Act  110 (“RFA”) requires that agencies, in proposing rules, consider the impact of those rules on small business or, in the statute's parlance, “small entities.”  111 These amendments affect large traders, FCMs, and other similar entities. The Commission has defined “small entities” as used by the Commission in evaluating the impact of its rules in accordance with the RFA. 112 In that statement, the Commission concluded that large traders and FCMs are not considered small entities for purposes of the RFA. Thus, under section 3(a) of the RFA, 113 the Chairman, on behalf of the Commission, certifies that this proposed rule will not have a significant economic impact on a substantial number of small entities. The Commission nonetheless invites comment from any firm which believes that these rules would have a significant economic impact on its operations.

The Paperwork Reduction Act (“PRA”)  114 imposes certain requirements on federal agencies, including the Commission, in connection with agencies' conducting or sponsoring any collection of information, as defined by the PRA. This proposed rulemaking would result in the collection of information within the meaning of the PRA, as discussed below. The proposed rulemaking contains collections of information for which the Commission has previously received control number 3038-0009 from the Office of Management and Budget (“OMB”). 115

The Commission is proposing to amend the above information collection to accommodate newly proposed and revised information collection requirements for participants in the futures and options markets that require approval from OMB under the PRA. The amendments are expected to modify the existing annual burden for complying with certain requirements of Part 17. Specifically, the Commission is proposing to amend §§ 17.00(a), 17.00(g), 17.00(h), and 17.03(d), which set out (1) the data submission standard and (2) the data elements for large trader reports required to be filed under § 17.00(a), among other things. 116 The Commission has previously estimated that the reporting requirements associated with § 17.00 of the Commission's regulations entail an estimated 17,160 burden hours for all reporting firms. 117 The Commission is revising its total burden estimates for this clearance to reflect updated estimates of the number of respondents to the collection. The Commission is also estimating the total capital and start-up costs and ongoing operation and maintenance costs associated with the proposed amendments to the Part 17 regulations described herein.

The Commission is therefore submitting this proposal to the OMB for its review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. Responses to this collection of information by reporting firms pursuant to the Part 17 regulations would be mandatory. The Commission will protect proprietary information according to the Freedom of Information Act  118 and 17 CFR 145, “Commission Records and Information.” In addition, CEA section 8(a)(1) strictly prohibits the Commission, unless specifically authorized by the CEA, from making public data and information that would separately disclose the business transactions or market positions of any person and trade secrets or names of customers. 119 The Commission is also required to protect certain information contained in a government system of records according to the Privacy Act of 1974. 120

The Commission expects that requiring reporting pursuant to a modern data standard will not require reporting firms to submit substantially more information than is currently required. Accordingly, the Commission is retaining its previous estimated numbers of reports, burden hours per report, and average burden hour cost. However, based on review of recent data from 2023, the Commission is reducing its estimate of the number of respondents from 330 to 310. Accordingly, the Commission is reducing its estimate from the previous 17,160 burden hours for all reporting firms  121 to 16,120 burden hours. In addition, the Commission anticipates that implementation of a modern submission standard as proposed in the rules should reduce or eliminate manual corrections and resubmissions that occur under the currently operative regulations.

The aggregate annual estimate for the reporting burden associated with Part 17, as amended by the proposal, 122 would be as follows:

Estimated number of respondents: 310.

Estimated Average Burden Hours per Respondent: 52 hours.

Estimated total annual burden on Respondents: 16,120 hours.

Frequency of collection: Periodically.

In addition, the Commission anticipates that the proposed rules will result in annual capital and start-up costs as well as operating and maintenance costs, consisting of (1) start-up costs to implement the proposed rule changes, (2) operating and maintenance costs to implement the proposed rule changes, and (3) costs to modify equipment as necessary to comply with the proposed rule changes. The Commission estimates that some respondents may report by secure FTP (“FTP filers”) and some firms may report manually (“manual filers”), and that the total capital and start-up costs will vary based on whether a respondent is an FTP Filer or a Manual Filer.

The Commission estimates that FTP filers would comprise 74 respondents. The Commission estimates that these respondents would incur one-time initial costs associated with (1) modifying systems to adopt a new data standard, (2) updating and testing systems to implement new data elements, and (3) modifying equipment to implement new data elements. First, the Commission estimates that such firms would incur a one-time initial burden of 200 hours per entity to modify their systems to adopt changes to the data submission standard described in this proposed rulemaking, for a total estimated 14,800 total hours. Second, the Commission estimates that FTP filers will incur total capital and start-up costs associated with updating, testing, and implementing new data elements of 400 hours, for a total estimated 29,600 hours. Third, the Commission also estimates that FTP filers would incur one-time costs of $1,000 to modify equipment to implement new data elements. This would amount to $6,689,600 (((200 + 400 hours) × 74 FTP filers × $149  123 )) + (74 FTP filers × $1,000) = $6,689,600).

In addition, the Commission estimates that as a result of implementing that new data submission standard, these 74 FTP filers may incur additional operating and maintenance costs of 24 hours per year, for 1,776 total hours, resulting in costs of $264,624 (24 hours × 74 FTP filers × $149  124 = $264,624), and, as a result of implementing new data elements, these 74 FTP filers may incur additional operating and maintenance costs of 24 hours per year, for 1,776 total hours, resulting in costs of $264,624 (24 hours × 74 FTP filers × $149  125 = $264,624). This yields additional annual operating and maintenance costs of $529,248 for FTP filers.

The Commission estimates that manual filers would comprise 236 reporting firms. The Commission estimates that these respondents would incur one-time initial costs associated with (1) modifying systems to adopt a new data standard and (2) updating and testing systems to implement new data elements. First, the Commission estimates such respondents would incur a one-time initial burden of 10 hours to modify their systems to implement a new data standard, for a total estimated 2,360 total hours. Second, the Commission estimates that manual filers will incur an average one-time cost of 20 hours to implement additional data elements required by proposed Appendix C, for a total estimated 4,720 total hours. This would amount to aggregate one-time initial costs of $927,480 ((10 hours + 20 hours) × 236 manual filers × $131  126 = $927,480).

In addition, the Commission estimates that as a result of implementing that new data submission standard, these 236 manual filers may incur additional operating and maintenance costs of 24 hours per year, for 5,664 total hours, for an associated cost of $741,984 (24 hours × 236 manual filers × $131  127 = $741,984), and, as a result of implementing new data elements, these 236 manual filers may incur additional operating and maintenance costs of 24 hours per year, for 5,664 total hours, for an associated cost of $741,984 (24 hours × 236 manual filers × $131  128 = $741,984). This yields additional annual operating and maintenance costs of $1,483,968 for manual filers.

Accordingly, the total estimated capital and start-up costs across all 310 reporting entities is $7,617,080 ($6,689,600 + $927,480 = $7,617,080). Based on five-year, straight line depreciation, this amounts to annualized total capital and start-up costs for all covered entities of $1,523,416. The total estimated annual operating and maintenance costs across all entities is $2,013,216 ($529,248 for FTP filers + $1,483,968 for manual filers = $2,013,216). The Commission estimates that total annual capital and start-up costs and operation and maintenance costs for all covered entities would be $3,536,632 ($1,523,416 + $2,013,216 = $3,536,632).

The Commission invites the public and other Federal agencies to comment on any aspect of the proposed information collection requirements discussed above. The Commission will consider public comments on this proposed collection of information in:

(1) Evaluating whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information will have a practical use;

(2) Evaluating the accuracy of the estimated burden of the proposed collection of information, including the degree to which the methodology and the assumptions that the Commission employed were valid;

(3) Enhancing the quality, utility, and clarity of the information proposed to be collected; and

(4) Minimizing the burden of the proposed information collection requirements on reporting firms, including through the use of appropriate automated, electronic, mechanical, or other technological information collection techniques, e.g., permitting electronic submission of responses.

Copies of the submission from the Commission to OMB are available from the CFTC Clearance Officer, 1155 21st Street NW, Washington, DC 20581, (202) 418-5160 or from https://RegInfo.gov. Organizations and individuals desiring to submit comments on the proposed information collection requirements should send those comments to:

• The Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10235, New Executive Office Building, Washington, DC 20503, Attn: Desk Officer of the Commodity Futures Trading Commission;

• (202) 395-6566 (fax); or

• OIRAsubmissions@omb.eop.gov (email).

Please provide the Commission with a copy of submitted comments so that comments can be summarized and addressed in the final rulemaking, and please refer to the ADDRESSES section of this rulemaking for instructions on submitting comments to the Commission. OMB is required to make a decision concerning the proposed information collection requirements between 30 and 60 days after publication of this release in the Federal Register . Therefore, a comment to OMB is best assured of receiving full consideration if OMB receives it within 30 calendar days of publication of this release. Nothing in the foregoing affects the deadline enumerated above for public comment to the Commission on the proposed rules.

CEA section 15(b) requires the Commission to take into consideration the public interest to be protected by the antitrust laws and endeavor to take the least anticompetitive means of achieving the objectives of the CEA in issuing any order or adopting any Commission rule or regulation.

The Commission does not anticipate that the proposed amendments to Part 17 would result in anti-competitive behavior. The Commission encourages comments from the public on any aspect of the proposal that may have the potential to be inconsistent with the antitrust laws or anticompetitive in nature.

For the reasons stated in the preamble, the Commodity Futures Trading Commission proposes to amend part 17 of title 17 of the Code of Federal Regulations as follows:

Table of Contents I. Executive Summary A. What is the purpose of the proposed regulatory action? B. What are the key provisions? C. What is the economic impact? II. Electronic Hazard Communication for Rail Transportation Emergency Response A. What action is being proposed? B. What is PHMSA's authority for this proposed action? C. Does this proposed action apply to me? III. Background A. What is train consist information? B. What is currently required regarding train consist information? C. Is there an alternative to the current train consist information requirements? D. How does train consist information affect rail transportation safety? E. How will requiring electronic train consist information affect rail transportation safety? F. What does PHMSA mean by real-time? G. How has PHMSA engaged stakeholders? IV. Section-by-Section Review of Proposed Amendments A. Sections 171.8 and 180.503 B. Section 174.26 C. Section 174.28 V. Regulatory Analyses and Notices A. Statutory/Legal Authority for This Rulemaking B. Executive Orders 12866 and 14094, and DOT Regulatory Policies and Procedures C. Executive Order 13132 D. Executive Order 13175 E. Regulatory Flexibility Act and Executive Order 13272 F. Paperwork Reduction Act G. Unfunded Mandates Reform Act of 1995 H. Draft Environmental Assessment I. Privacy Act J. Executive Order 13609 and International Trade Analysis K. National Technology Transfer and Advancement Act L. Cybersecurity and Executive Order 14082 M. Severability I. Executive Summary A. What is the purpose of the proposed regulatory action?

The Pipeline and Hazardous Materials Safety Administration (PHMSA) proposes to amend the Hazardous Materials Regulations (HMR; 49 Code of Federal Regulations (CFR) parts 171 to 180) in response to congressional mandates and a safety recommendation of the National Transportation Safety Board (NTSB) by requiring all railroads transporting hazardous materials to generate in electronic form train consist information, maintain that information off-the-train, update that information in real-time, and provide that information to authorized “emergency response personnel”  1 in advance of their arrival to an accident or incident. As such, railroads operating a train carrying hazardous materials will be required to push that information to state-authorized local first responders needing that information promptly following either an accident involving that train, or an incident involving the release or suspected release of hazardous material from that train. Railroads must also ensure that, in updating that electronic train consist information, they also update hard (printed) copy versions of the same information provided to train crews such that both hard (printed) copy and electronic versions of that information are consistent, accurate, and available when needed most. PHMSA expects this enhanced, proactive approach will ensure that emergency response personnel have timely, accurate, actionable information regarding the hazardous materials being transported and the hazards they may encounter when they are en route to or reach the scene of a rail accident or incident, thereby reducing the risks to surrounding communities and the environment while expediting site remediation, restoration of rail service, and community engagement efforts as investigation activity proceeds. While PHMSA understands the availability of electronic real-time train consist information may not have changed the outcome of the recent Norfolk Southern train derailment in East Palestine, OH, that accident and similar events that have occurred in recent years highlight the importance of providing emergency response personnel with timely, complete, and accurate information regarding hazardous materials within a train—as any additional time for responders to prepare for what they will encounter may reduce risks and result in significant public safety, commercial, and environmental benefits.

The amendments proposed herein respond to a mandate in section 7302 of The Fixing America's Surface Transportation Act (FAST Act, Pub. L. 114-94), as amended by the Investment Infrastructure and Jobs Act (Pub. L. 117-58), 2 to require Class I railroads transporting hazardous materials to generate accurate, real-time, electronic train consist information that must be provided “to State and local first responders, emergency response officials, and law enforcement personnel that are involved in the response to or investigation of an accident, incident, or public health or safety emergency involving the rail transportation of hazardous materials.” However, consistent with the broader language within an NTSB safety recommendation following the 2005 collision of two freight trains near Anding, MS, PHMSA proposes extending the NPRM's proposed requirements to all railroads in light of the risks to public safety and the environment from delay in responding to releases from even smaller, Class II and III railroads on which hazardous materials are transported.

1. Definition of “Train Consist Information”: PHMSA proposes to amend the definition of “train consist” at § 171.8 to be recharacterized as “train consist information,” meaning a hard (printed) copy or electronic record of the position and contents of hazardous materials rail cars of a train where the record includes information required by § 174.26. Specifically, the information includes the contact information for a railroad-designated emergency point of contact; the point of origin and destination of the hazardous materials on the train subject to shipping paper information requirements; shipping paper information required by §§ 172.201 to 172.203; and emergency response information required by § 172.602(a). PHMSA also proposes a conforming revision to § 180.503 to delete a definition of “train consist” that is not used in that part.

2. Notice to Train Crews: PHMSA proposes to amend the provision to enhance existing requirements at § 174.26 to provide train consist information (as PHMSA proposes to define that term at § 171.8) in hard (printed) copy to train crews prior to movement of hazardous materials by rail. Specifically, PHMSA proposes to clarify responsibilities for railroads to provide a hard (printed) copy version of train consist information to train crews, for train crews to update that hard (printed) copy version of train consist information, and that the hard (printed) copy of the train consist information must be maintained in a conspicuous location of an occupied locomotive. Railroads must also ensure that train consist information is generated and updated in electronic form, maintained offsite of the train itself, and immediately accessible by the railroad's designated emergency response point of contact. Railroads must ensure the hard (printed) copy and electronic forms of the train consist information are at all times accurate and consistent.

3. Emergency Response Information Sharing Requirements: PHMSA proposes a new section at § 174.28 that will establish real-time, electronic train consist information-sharing requirements for hazardous materials transported by rail. All railroads will need to generate and provide train consist information by electronic means to authorized emergency response personnel that could be involved in the response to—or investigation of—an accident, incident, or public health or safety emergency involving the rail transportation of hazardous material. Information generated and shared in accordance with this section must be accurate, provided in a secure and confidential manner consistent with the intent of the FAST Act, and accessible at any time by authorized emergency response personnel. In the event of either an accident, or incident involving the release or suspected release of hazardous material, railroads operating trains carrying hazardous material will be required to promptly forward that train consist information in electronic form to state-authorized local first responders within a 10-mile radius of the incident or accident to assist in response and investigation efforts.

PHMSA estimates that the proposed rule would impact seven Class I railroads, 11 Class II railroads, and 585 Class III railroads and estimates the undiscounted total financial impact of the rulemaking over a 10-year analysis period to be about $46.3 million in 2021 dollars, for an average annual cost of $4.6 million. The discounted total cost of the rulemaking over the analysis period is estimated to be $32.8 million in 2021 dollars at a 7 percent discount rate. The benefits of this proposed rule will depend greatly on the effectiveness of having timely access to real-time train consist information to improve emergency responders' ability to respond to rail accidents and incidents, which may be a high-consequence/low-probability event such as the Norfolk Southern train derailment at East Palestine, OH. PHMSA anticipates the proposed rule will improve emergency responders' ability to promptly identify all the hazardous materials cars involved in an accident and to timely assess the threat from a hazardous materials release. PHMSA estimated the annual damage cost of hazardous material incidents on rail to be $15.6 million in 2021 dollars. Therefore, the proposed rule would have to reduce damage costs by about 30 percent for the monetized benefits of the proposed rule to equal costs. The following table summarizes the annual costs and benefits of the major provisions of the proposed rule in constant 2021 dollars.

As illustrated by the Norfolk Southern train derailment incident at East Palestine, OH, such accidents can have substantial impacts that are not captured by this preliminary regulatory impact analysis (PRIA)—including the long-term environmental concerns and health risks (both physiological and psychological) for local residents. Research also shows that such accidents can reduce property values which—in turn—can slow down economic activity in the area. 3 Additionally, of the 140,000 total route-miles of track in the U.S., 104,000 miles are in rural and tribal areas, suggesting that train-related hazardous material incidents mainly happen in areas populated by disadvantaged communities. 4 PHMSA acknowledges and considers these unquantified factors in selecting the provisions of the proposed rulemaking.

PHMSA proposes to require all railroads to generate, maintain externally to the train itself, and update in real-time, accurate train consist information in electronic form, and to make this information available to authorized first responders, emergency response officials, and law enforcement personnel at all times upon request. Further, PHMSA proposes that, in the event of either an accident, or an incident involving the release or suspected release of hazardous material, railroads operating trains carrying hazardous material must promptly forward that train consist information to state-authorized local first responders within a 10-mile radius of the incident or accident. PHMSA also proposes conforming and clarifying revisions to existing HMR requirements governing notification (via hard copy, specially printed, documentation) of train crews for trains carrying hazardous material.

PHMSA proposes a compliance period of one year from the date of publication of a final rule in this rulemaking to allow railroads sufficient time to implement (via conducting training, procurement and installation of pertinent equipment and software, and development of procedures and security protocols) measures for generating, organizing, and providing to Federal, state and local first responders, emergency response officials, and law enforcement personnel train consist information in electronic form. Detailed discussions of changes to sections of the HMR based on this proposed action are provided in Section IV. below.

PHMSA's statutory authority for this action is twofold. Section of 7302 of the FAST Act, as amended by the Investment Infrastructure and Jobs Act, directs the Secretary to issue regulations to require Class I railroads  5 transporting hazardous materials to generate accurate, real-time, electronic train consist information that must be provided “to State and local first responders, emergency response officials, and law enforcement personnel that are involved in the response to or investigation of an accident, incident, or public health or safety emergency involving the rail transportation of hazardous materials.” Specifically, section 7302(a)(1) directs the Secretary to require that Class I railroads include the following data in connection with such electronic, real-time train consist information:

(1) The identity, quantity, and location of hazardous materials on a train;

(2) The point of origin and destination of the train;

(3) Any emergency response information or resources required by the Secretary; and

(4) An emergency response point of contact designated by the Class I railroad.

Section 7302(a)(4) directs the Secretary to prohibit any Class I railroad, employee, or agent from withholding, or causing to be withheld, that information from authorized entities. Section 7302(a)(5) directs the Secretary to establish security and confidentiality protections, including protections from the public release of proprietary information or security-sensitive information, to prevent the release of real-time train consist information to unauthorized persons. Finally, section 7302(a)(6) directs the Secretary to allow each Class I railroad to enter into a memorandum of understanding with any Class II railroad or Class III railroad that operates trains over the Class I railroad's line to incorporate the Class II railroad's or Class III railroad's train consist information.

In addition to the FAST Act mandate, the Federal Hazardous Materials Transportation Act (HMTA; 49 U.S.C. 5101 et seq. ) at 49 U.S.C. 5103 gives the Secretary general authority to issue regulations for the safe transportation of hazardous material in commerce.

The Secretary delegates the above statutory authorities to PHMSA at 49 CFR 1.97.

PHMSA's proposed action applies to all railroads in commerce. Although the FAST Act contains an explicit requirement only for Class I railroads transporting hazardous materials to generate and provide accurate, real-time, electronic train consist information, PHMSA proposes—pursuant to its delegated general authority under the HMTA to make regulations for the safe transportation of hazardous materials including those materials transported by rail—to require Class II and Class III railroads (hereafter referred to as “regional and short line railroads”) to also compile, update, and forward (as proposed herein) accurate, real-time train consist information in electronic form. PHMSA notes that this broader approach is consistent with the inclusive language within NTSB safety recommendation R-07-04 issued following the 2005 collision of two freight trains containing hazardous materials near Anding, MS; safety recommendation R-07-04 called on PHMSA to require that all railroads immediately provide real-time train consist information to emergency responders following an accident or incident involving rail transportation of hazardous material. 6 NTSB's safety recommendation is consistent with the common-sense proposition that rail transportation of hazardous material is not limited to Class I railroads, and thus the prospect of an accident or emergency is also not limited to those railroads. Regional and short line railroads also transport hazardous material and account for over a third of freight rail in the United States, covering about 50,000 miles of the 140,000-mile U.S. freight rail network. Further, regional and short line railroads are typically the first and last mile of service and often serve as the only connection of rural, small town, and tribal areas of the United States to the nationwide network of railroads—similarly, emergency response personnel within those areas are likely to be the only personnel close enough to the incident or accident to respond quickly. Thus, it is vital for emergency responders and law enforcement in areas served by these railroads to also have access to accurate and real-time train consist information.

The train consist generally refers to the contents of a train including the position of locomotives and cars, as well as both non-hazardous and hazardous freight within those cars. The HMR currently defines at § 171.8 the “train consist” as a written record of the contents and location of each rail car  7 in a train.

The HMR at § 174.26(a) requires that railroad train crews must have a paper document that reflects the current position in the train of each rail car containing a hazardous material and must update it to indicate changes in the placement of a hazardous material rail car within the train. 8 The train crew may update the document by handwriting on it or by appending or attaching another document to it. The train crew must also have a copy of a document showing the information required on shipping papers, including applicable emergency response information. See § 174.26(b).

A common practice for railroads in satisfying the above regulatory requirements is capturing all required information in a single hard copy (generally printed) document (sometimes referred to as the “train consist” or “train list”) that is provided to train crews. Some railroads, primarily those designated as Class I, compile information in an electronic database (which could be maintained by the railroad itself, or a third party vendor utilizing the “cloud”) and provide hard copies of some of the database information to the train crew. Those electronic databases may include more information than just the contents and location of a hazardous material rail car in the train: they may incorporate information linking the hazardous material at each location in the train with shipping papers (commonly referred to as bills of lading, required by part 172, subpart C) and emergency response information (required by part 172, subpart G).

Starting in 2019, several railroads applied for and were granted special permits to allow train consist information documentation to be maintained and communicated using only electronic means in connection with specific service routes. To date, seven special permits (SPs) have been issued, 9 including for six Class I railroads: DOT-SP 20954 (issued to BNSF Railway Company); DOT-SP 21046 (issued to CSX Transportation and recently expired); DOT-SPs 21053 and 21323 (issued to Canadian National Railway Company); DOT-SP 21059 (issued to Union Pacific Railroad Company); and DOT-SP 21110 (issued to Norfolk Southern Railroad). A single special permit (DOT-SP 21266) has been issued to a short line railroad: Richmond Pacific Railroad. The special permits provide operational controls and reporting requirements including the following items of interest:

(1) Train consist information must be readily available by electronic means to government officials ( e.g., emergency response personnel);

(2) Updates of the train consist information must be done electronically and in real-time;

(3) More than one method of electronic information-sharing must be available to first responders should the primary method ( i.e., cellular network devices) not work, as well as a redundant communication option should electronic service be unavailable;

(4) Upon notification of an incident to response authorities, the train consist information must be provided;

(5) Training must be provided to first responders along portions of a route without cellular service on methods of communication during an incident; and

(6) Incidents where information was shared electronically with first responders must be documented and a consolidated report must be provided to PHMSA discussing successes and any corrective actions.

PHMSA is not aware of any negative impacts associated with railroads operating under these special permits authorizing electronic train consist information, and based on incident experience, has had positive outcomes from the practice. For example, BNSF Railway Company has reported four occasions where electronic train consist information was shared with first responders to assist in prompt emergency response.

Train consist information aids Federal and state first responders, emergency response officials, and law enforcement personnel in ensuring coordinated action to assess an accident, incident, or public health or safety emergency involving hazardous materials in rail transportation, which in turn informs the appropriate response action ( e.g., fire suppression media) precisely when every second counts. Those officials typically rely heavily on this information—along with hazard communication required pursuant to part 172 requirements pertaining to marking (subpart D), labelling (subpart E), and placarding (subpart F)—for timely awareness about hazardous material on a train in emergency situations. Indeed, because placarding may be damaged or inaccessible (due to fire, hazardous material release or orientation of the rail car), train crews may be injured or unavailable, or wireless telecommunications service may be limited, the hard copy form of train consist information can often be the only accurate basis of knowledge on the hazardous material within a train. Further, because emergency response may involve personnel from different and distant jurisdictions converging on a single location at different times, 10 there is a premium on having a common understanding of the hazardous material on the train as coordinated response efforts commence. Timely, accurate train consist information also ensures investigation efforts by Federal and state personnel can promptly identify systemic safety issues meriting broader dissemination and address community concerns regarding the availability and reliability of information following an accident or incident.

An example taken from a 2007 NTSB investigation report  11 underscores the importance of the availability of timely, accurate train consist information documentation. In the early morning hours of July 10, 2005, two Canadian National Railway Company (CN) trains transporting mixed freight including hazardous material collided head-on in Anding, MS. The collision resulted in the derailment of six locomotives and 17 cars. About 15,000 gallons of diesel fuel were released from the locomotives and resulted in a fire that ended up burning for roughly 15 hours. There also was a limited release of hazardous materials from venting tank cars; however, that did not contribute to the severity of the accident. Two crewmembers from each train were killed in the accident and the train consist information aboard the locomotives was destroyed. Nearly 100 residents from the surrounding community were evacuated from the area as a precaution. The accident ultimately resulted in ca. $10 million (in 2005 dollars) of property damage and environmental clean-up costs.

When emergency responders arrived on the accident scene within a half-hour of the collision, it was dark; the fire was intense, and heavy black smoke prevented visual identification of all the hazardous material tank cars in the wreckage. The first CN official arrived at the scene an hour after the collision and told emergency responders that he did not have any train consist information documentation or knowledge about the hazardous materials on either train. The absence of train crews to pass along train consist information and the inability to access the information on the locomotive— i.e., the lack of immediately available train consist information—severely restricted the ability of emergency responders to make a quick assessment of the potential for a hazardous materials release and thus to respond appropriately.

The CN official obtained accurate train consist information on the northbound train via cell phone from the CN dispatcher and provided it to emergency responders, but cell phone service was disrupted before any information about the southbound train could be obtained. Without a document for the southbound train, unsuccessful attempts were made by response personnel on-scene to identify potential hazardous material threats based on placarding and tank car stenciling— i.e., visible hazard signage and markings on the rail cars. Over two-and-a-half hours after the collision, another CN employee that had traveled from Jackson, MS (roughly 45 minutes away from the accident) delivered copies of the train consist information for both trains—but the information he delivered for the southbound train did not accurately reflect the actual makeup of the southbound train at the time of the accident. It was nearly another hour (almost four hours since the collision) before CN officials and emergency responders were able to develop an accurate listing of the derailed cars from the southbound train involved in the fire by visually surveying the scene. Only after being able to determine which hazardous materials were being conveyed on the train was it safe for emergency responders to begin moving cars and applying aqueous film forming foam to suppress the fires at the site. It would be roughly fourteen hours after the collision before the fire was declared suppressed.

In reviewing the collision and emergency response efforts, the NTSB concluded that the lack of timely information on the contents of each train—between the loss of train crew personnel, the damaging of stenciling and hazard placarding, and CN's failure to provide timely and accurate train consist information for both trains (particularly the southbound train)—significantly hampered emergency response efforts. The NTSB consequently issued safety recommendation R-07-04 calling on PHMSA to require that all railroads immediately provide real-time train consist information to emergency responders following an accident or incident involving rail transportation of hazardous material. 12

The importance of timely, accurate train consist information is also underscored by the recent Norfolk Southern train derailment in East Palestine, OH. Although NTSB's investigation of that derailment is ongoing, the NTSB noted during a press conference announcing their preliminary findings on February 23, 2023, that many of the hazardous materials placards displayed on the tank cars melted in the ensuing fire following the derailment. 13 Firefighters who responded to the incident from more than 30 minutes away also noted that they didn't gain access to information about the train consist until well after they arrived on scene. PHMSA notes that in such scenarios, emergency response personnel may have to rely on the train consist information provided by the train crew and the train operator as they were conducting their initial assessment of the incident and planning response actions. Notably, too, the East Palestine, OH accident exemplifies how investigation efforts by regulatory officials into potential systemic issues revealed by an incident (or to assuage community anxieties regarding the response effort) can often occur simultaneously with incident response efforts at the site.

The HMR currently imposes some documentation requirements pertaining to hazardous material within a train. Specifically, each of §§ 171.8 (“written record”) and 174.26 (“copy of a document”) contemplate that a “train consist” consists only of a printed, hard copy relating only high-level information (the “contents and location of each rail car in a train”) pertaining to any hazardous materials being transported. And although provisions elsewhere in the HMR governing emergency response (specifically, part 172, subpart G) contemplate that train crews will need to have, or have “immediate” access to, more fulsome information (regarding hazardous material technical name, emergency response information, emergency response telephone numbers, etc.), § 172.602(b) similarly contemplates that information will be in hard copy (“printed”) form rather than electronic form.

These limited documentation requirements can contribute to delays in emergency response actions and potentially inaccurate information being provided to emergency response personnel at precisely the same moment when accurate, timely information is critical to response efforts. The success of any response effort turns on the accuracy of information regarding the precise hazards confronting emergency response personnel and the surrounding community. But as illustrated by both the Anding, MS collision and the East Palestine, OH derailment, emergency response personnel may not be able to rely on hazard communication placarding or stenciling to know with confidence whether, and in which car, a train is transporting hazardous material as those hazard communication tools may have been obscured ( e.g., through burning) or been rendered inaccessible. Nor, moreover, can the emergency response personnel necessarily rely on the train crew or the hard copy of the train consist information they may have onboard; as in the Anding, MS collision, train crews can become incapacitated and hard copies of the train consist information may perish in the incident. Further, even if those resources are available, they may only be available in the form of a single document or a limited number of persons on the train crew, thereby creating the potential for conflicting information or bottlenecking of critical information within (potentially multi-disciplinary and multi-jurisdictional) response efforts. 14 Additionally, the fact that emergency response personnel converging on the site from multiple jurisdictions may not have access to that information until they arrive forfeits opportunities to begin reviewing pertinent immediate actions and coordinating response efforts while en route to the site—adding more delay in the critical moments immediately following an accident or incident. 15 Lastly, because investigation efforts often proceed nearly simultaneously with emergency response, delays in obtaining accurate train consist information can hamper investigation efforts to identify systemic issues or even an imminent hazardous materials transportation safety hazard that could result in similar incidents elsewhere or to address community concerns regarding the adequacy of response efforts.

PHMSA expects that maintaining electronic train consist information away from the train, and which is updated in real-time as a train's hazardous contents change, address many of those shortcomings from reliance solely on hard copies of that information. Remote ( e.g., in the “cloud”) compilation and maintenance of an electronic copy of train consist information that is synced in real-time with the hard (printed) copy of that information maintained by train crews per § 174.26 promotes the accuracy of both electronic and hard (printed) copy versions of that information, each of which can be checked against the other. And to the extent that the compilation and updating of that electronic record occurs automatically it can minimize the introduction of human error into either the hard or electronic versions of the train consist information. Additionally, as illustrated by the Anding, MS collision, hard copy documents may be destroyed or inaccessible, or train crews may become injured, rendering them ineffective for the exchange of information to emergency response personnel; similarly, reliance on a single hard copy document or a limited number of personnel risks bottlenecking or conflicting accountings of critical information. In contrast, compilation and maintenance remotely of an electronic version of train consist information will provide necessary redundancy for a railroad's ability to exchange critical information with emergency response personnel, promising distribution of critical information that is more uniform, fulsome, well-distributed, and timely than reliance on hard copies and train crew personnel alone. Additionally, remotely-maintained, electronic train consist information promises earlier coordination of emergency response efforts; emergency response personnel commuting to an incident site from various jurisdictions may be able to access electronic train consist information (as well as pertinent training and immediate actions) en route, saving precious time in identifying immediate actions and coordinating response efforts. Lastly, electronic train consist information can also facilitate investigation efforts in parallel with emergency response efforts, thereby allowing more timely identification and remediation of systemic issues across the industry, as well as helping to assure affected communities of the adequacy of response efforts.

PHMSA notes that the experience with the special permits authorizing limited use of electronic approaches to maintaining train consist information discussed in Section III.C above provides additional evidence of the potential safety-enhancing benefits of requiring use of such tools more broadly as proposed in this NPRM. PHMSA also notes that stakeholders within the emergency response community have also submitted comments in this rulemaking proceeding calling on PHMSA to codify a requirement for electronic, real-time train consist information to supplement existing hard copy documentation requirements. 16

A plain language meaning of real-time is simultaneous (or nearly simultaneous) with the time which something takes place. PHMSA interprets the references in the FAST Act instruction and NTSB safety recommendation R-07-04 to “real-time” train consist information to have a dual meaning: (1) that the update of train consist information during transportation should occur at the time changes to the hazardous material on the train are being made, thereby ensuring the accuracy of information; and (2) that the required train consist information is provided to authorized first responders at the time a response to or investigation of an accident, incident, or public health or safety emergency is occuring. This latter element in turn means that the required electronic train consist information should be provided to and is accessible to authorized personnel prior to an accident or incident—and pushed promptly following initiation of an accident or incident to emergency response personnel needing that information to identify potential hazardous material threats and take appropriate measures and commence investigation activities.

Although PHMSA understands that current HMR requirements require operators to update hard (printed) copy train consist information as there are changes to that information, in practice that hard copy-exclusive approach can introduce the potential for human error; often a member of the train crew (in most circumstances, the engineer) must update by hand the printed, hard copy of the train consist information in the crew's possession to provide an accurate listing of the position of hazardous material cars. Additionally, PHMSA understands that current HMR regulations do not contain specific requirements for railroads to either (1) make accurate, electronic, real-time train consist information available to authorized emergency response personnel at all times so they have it in advance of an accident or incident, or (2) take affirmative steps to promptly forward that same information to state-authorized local first responders following either an accident involving a train carrying hazardous material, or an incident involving a train carrying hazardous material where a release of that hazardous material has occurred or is suspected. As discussed in Section III.B. above, the HMR currently requires the use of hard copies that may not lend themselves to real-time updating or transfer to a person off the train. Existing HMR requirements also lack specificity regarding railroads' obligations to proactively and timely forwarding of that information to first responders, emergency response officials, or law enforcement personnel; rather, the HMR speaks in terms of making that information “accessible” to train crews (§ 172.602(c)); merely “available” to first responders, emergency response officials, or law enforcement personnel (§ 172.600(c)); in the possession of train crews (§ 174.26(a)); and submitted to the National Response Center “as soon as practicable but no later than 12 hours after the occurrence of any incident . . .” (§ 171.15).

PHMSA expects that implementation of equipment and procedures to enable real-time updating of electronic train consist information—as well as more explicit requirements for railroads to make that information available to emergency response personnel at all times or pushed to them following an accident or incident—will be practicable for Class I, regional and short line railroads. As a general matter, PHMSA submits that those requirements proposed in this NPRM should not come as a surprise to any railroad transporting hazardous material as the Section 7302 FAST Act mandate (focused by its terms on Class I railroads) dates from 2015 and NTSB safety recommendation R-07-04 (which contains no such limitation to Class I railroads) dates from 2007. 17 Nor for that matter, are the requirements proposed herein on the cutting edge of technology—the sort of equipment and procedures likely needed for implementation are likely to be incremental adaptations of supply chain management software, equipment, and procedures employed in ordinary course by a variety of retail providers and logistics companies for tracking goods within national and global supply chains (of which the railroads themselves are a critical component). Indeed, PHMSA submits that the fact that commercial entities can implement cost-effective, real-time status tracking procedures and equipment for non-hazardous goods, suggests that reasonably prudent railroad operators would be incented to employ similar equipment and procedures when transporting materials known to be hazardous to public safety and the environment. 18

Nor, for that matter, would railroads' implementation of the requirements proposed in this NPRM be against a blank canvas. As discussed above, much of the train consist information that PHMSA contemplates would be generated, maintained, and provided in electronic form is largely already maintained by the railroads pursuant to existing HMR requirements in printed, hard copy form; and PHMSA's proposed requirement that such information be readily accessible in advance of an accident or incident, and forwarded to state-authorized local first responders electronically promptly following an accident or certain incidents, is similar to existing HMR requirements to make certain information available to emergency response personnel and train crews. Additionally, as discussed in Section III.C above, a number of the Class I railroads (and at least one regional railroad) have already demonstrated the feasibility of compiling electronic real-time train consist information pursuant to special permits along specific routes; those special permits contain requirements for updating and prompt relay of that electronic train consist information to emergency response personnel in the event of an accident or incident.

PHMSA also submits that railroads may be able to leverage existing software platforms to satisfy this NPRM's proposed electronic train consist information maintenance, updating, and forwarding requirements. One such platform suggested by stakeholders in this rulemaking proceeding is the AskRail® system developed by the American Association of Railroads (AAR), the International Association of Fire Chiefs, the Operation Respond Institute, and others. 19 This platform—which is available for use in both desktop and mobile device applications—provides authorized emergency response personnel with accurate, continuous access in electronic format to most of the train consist information contemplated by PHMSA's proposed revisions, including the following: the proper shipping name and United Nations ID number of the hazardous material; packing group and placarding requirements and links to pertinent Emergency Response Guidebook (ERG) and safety data sheets; quantity and location of the material on the train; car type, DOT specification, and location within the consist ( i.e., the train); and the emergency response point of contact for the railroad. Changes in train consist information are uploaded to the AskRail® system from central processing centers operated by the railroads or vendors based on data delivered via any of the following: (1) voice reports from train crews, (2) digital communications with mobile devices operated by train crews, or (3) digital communications with automatic equipment identification (AEI) systems (discused further below). To the extent that the AskRail® system (or any alternative platform used in complying with the NPRM's proposed requirements) may lack certain information ( e.g., origin-destination information), functionalities (in particular, the ability for railroads to forward information to pertinent emergency response personnel in the event of an emergency) or liberal access requirements, PHMSA expects that such systems could be designed or modified and railroads could proactively engage the response community to address those concerns. Similarly, although PHMSA understands that current use of AskRail® system may be largely limited to Class I railroads, 20 it is unaware of any fundamental bar to modification of that system (or for that matter, the design or modification of alternative systems) to accommodate increased use by regional and short line railroads. 21 PHMSA itself commissioned a pilot program that in 2020 demonstrated the technical feasibility of integration of a leading proprietary commercial train consist information platform for Class II and III railroads (the Wabtec Train Management System) with the AskRail® system. 22

Some railroads may also opt to reduce the risk of human error by employing automatic means of updating the electronic train consist information. Some railroads already employ such AEI systems consisting of identification tags mounted on each train car (locomotives, end-of-train units, rail cars, and intermodal containers) and installed, trackside AEI readers ( i.e., antennas) or portable, handheld AEI readers that record and relay switching of cars to the railroad's computer system. Installed, trackside AEI readers are placed at key locations such as the entrances and exits of rail yards and identify cars on a train by the tags on the cars as they pass and automatically relay information back to the railroad's computer system to update the electronic train consist information. Appropriate placement of installed, trackside AEI readers is imperative for ensuring accurate train consist information is relayed to the railroad computer systems; for example, in the 2005 Anding, MS collision, a contributing factor in the confusion regarding the contents of the southbound train was that the last change in the train consist occurred between installed, trackside AEI readers. 23 PHMSA submits, though, that challenges associated with identifying proper placement of installed, trackside AEI readers could be mitigated somewhat by timely supplementation with one or more of portable, handheld AEI readers and voice reports by train crew personnel of changes to the hard (printed) copy train consist information.

PHMSA and the Federal Railroad Administration (FRA) sought input from stakeholders on the topic of electronic train consist information as part of the Rail Safety Advisory Committee (RSAC) Hazardous Materials Issues Working Group. The RSAC is a Federal advisory committee established by FRA and is governed by the process and transparency requirements of the Federal Advisory Committee Act (Pub. L. 92-463). The RSAC develops recommendations for certain new regulatory standards, through a collaborative process, with all segments of the rail community working together to find solutions to safety issues. The RSAC in turn has assembled a Hazardous Materials Issues Working Group to develop recommendations for changes and updates to the regulations for rail transportation of hazardous material.

In 2016, the Hazardous Materials Issues Working Group (hereafter referred to as “Working Group”) met several times to discuss updates to the HMR's rail transportation safety requirements. 24 On two occasions, the Working Group discussed the issue of accurate and real-time electronic train consist information and whether existing technology could achieve the accurate and real-time exchange of train consist information. Several stakeholders contended that the AskRail® system could provide the information required by the FAST Act. However, representatives from industry asserted that some information required by the FAST Act (specifically, origin and destination information) may not be relevant in an emergency response situation and did not see a need to include these data in AskRail® entries; similarly, industry representatives also asserted that there was limited safety value in emergency response personnel having real-time electronic train consist information unless there had actually been an accident or incident. Some stakeholders also expressed concern that the limited access rights currently authorized in the AskRail® system could limit its effectiveness, as the current version of the AskRail® system requires rigorous security vetting for would-be users. In the event of an accident or incident at a location where authorized local first responders, first responders, emergency response officials, and law enforcement had not been authorized access to the AskRail® system in advance, access to train consist information may be unavailable to them through AskRail®.

Additionally, the Working Group discussed the prevalence of installed, trackside AEI readers and whether those AEI readers can provide accurate, real-time updates to train consist information. That discussion highlighted that a challenge in increasing reliance on installed, trackside AEI readers to provide accurate, real-time updates to electronic train consist information is that their placement across the nation's railroad system is not uniform; all participants noted that more frequent and uniform placement of AEI readers throughout the nation's railroad system would be required before that equipment could be relied on to provide accurate, real-time updates to electronic train consist information. Although the Working Group discussed a variety of potential approaches to address this concern—including supplementation by train crew voice reports and a standardized requirement for placement of installed, trackside AEI readers within three miles of each train yard ( i.e., the location where rail car switching operations are likely to be completed)—no consensus was reached on any one solution or suite of solutions. Further, at least one stakeholder—American Short Line and Regional Railroad Association (ASLRRA), the industry trade group representing regional and short line railroads—strongly opposed any suggestion of a regulatory requirement for installed, trackside AEI readers in implementing FAST Act requirements.

Following those meetings, PHMSA in 2017 issued an Advance Notice of Proposed Rulemaking (ANPRM) soliciting comment on a number of questions on implementation of the FAST Act's then-effective mandate to employ “fusion centers” as clearinghouses for receiving from railroads, and forwarding to emergency response personnel, electronic real-time train consist information. 25 Although many of the questions posed by PHMSA and written comments received from stakeholders were focused on implementation mechanics specific to fusion centers, a number of entities submitted comments speaking to other implementation dimensions of the FAST Act mandate. Specifically, AAR and ASLRRA  26 repeated contentions made in the Working Group discussions regarding the limited value of origin-destination information, or 24/7 availability of electronic real-time train consist information for emergency response efforts. Their respective comments also highlighted potential implementation challenges (pertaining to cost, gaps in internet connectivity) associated with use of portable, handheld AEI readers, as well as the existing gaps in coverage for installed, trackside AEI readers. However, the AAR comments ultimately concluded that electronic train consist information could be a valuable option for improving emergency response efforts, and the AskRail® system could be extended beyond Class I railroads—even as they argued against mandating electronic real-time train consist information as a substitute or supplement for hard copy documentation and bemoaned the potential costs of ensuring regional and short line railroad participation in the AskRail® system. IAFC also submitted comments “strongly” arguing for forwarding of electronic train consist information in the event of an accident or incident, noting that the AskRail® system could—when supplemented by existing hard copy documentation requirements—serve that purpose. 27

Section 171.8 defines key terms used in the HMR. A train consist is defined in this section as a “written record of the contents and location of each rail car in a train”  28 —which PHMSA and industry have historically understood to refer to the hard (printed) copy documentation maintained and updated by train crews pursuant to § 174.26(a). Train crews are also obliged by § 174.26(b) to maintain a hard copy of certain “emergency response information” specified in part 172, subpart G, as well as other shipping paper information specified in part 172, subpart C.

As discussed in Section II.B above, section 7302 of the FAST Act directs (consistent with NTSB safety recommendation R-07-04), that PHMSA require railroads to (in real-time) generate, maintain, update, and share with emergency response personnel, certain real-time train consist information in electronic form. That list of information specified in the FAST Act is by-and-large consistent with the suite of safety-critical information in each of the current definitions of “train consist” at § 171.8 (which in turn is aligned with the information contained with the notice provided to train crews at § 174.26) and the “emergency response information” specified at § 172.602 (which information must also be immediately available to train crews pursuant to § 174.26(b)). PHMSA, therefore, proposes to replace the term “train consist” with the term “train consist information” at § 171.8, to mean a record of information (as required by § 174.26) of the position and content(s) of hazardous materials rail cars of a train. Specifically, the information includes contact information for a railroad-designated emergency point of contact; the point of origin and destination of hazardous materials that is subject to shipping paper requirements on the train; shipping paper information required by §§ 172.201 to 172.203; and emergency response information required by § 172.602(a). 29 The information must be maintained in both hard (printed) copy and electronic forms. PHMSA also proposes deletion of the mirror definition of “train consist” at § 180.503, as that section is the only place in which that term appears within part 180.

PHMSA notes that this proposed approach ensures that implementation of the FAST Act's requirements regarding the content and form of real-time train consist information will be performed in a manner that builds on—rather than disrupts—railroad compliance strategies with existing HMR requirements. With respect to the proposed new term “train consist information” the proposed required information largely consists of the information that railroads are already obliged by the HMR to provide in hard (printed) copy to their train crews and to make available to emergency response personnel in connection with hazardous materials that are subject to shipping paper requirements. Although the FAST Act contemplates the compilation, updating, and transfer to emergency personnel of an additional species of information—the origin and destination of hazardous material on the train, and the contact information for a railroad-designated emergency point of contact—PHMSA understands that information is accessible to the railroads. Origin and destination information is an important commercial term of service, in addition to being a critical piece of information to emergency response personnel should gaps ( e.g., from inaccuracies, loss, or inaccessibility) in other train consist information require quick reverse-engineering by emergency response personnel of the hazardous material carried by a train involved in an accident or incident. Similarly, the railroad itself would designate its emergency point of contact. And although PHMSA understands that one potential compliance tool (namely, the AskRail® system) may not currently contain information on the origin and destination of hazardous material on a train, it expects that (based on the widespread use of sophisticated, real-time tracking of goods generally discussed at Section III.F. above) that modification of that system (or design or modification of an alternative platform) to integrate that functionality is practicable. However, the positive experience associated with use of electronic train consist information pursuant to special permit (discussed at Section III.C. above) is also evidence of the proven safety value of electronic, real-time train consist information.

With respect to a railroad's identification of a designated emergency point of contact, PHMSA is less concerned with the specific title of that individual than it is in ensuring that (1) the contact information provided is complete—to include the name, title, phone number and email address, (2) that individual is accessible at all times (24/7) the train is in transportation in the event of an accident or incident involving rail transportation of hazardous material (and then following an incident or accident until emergency response efforts have completed), and (3) that individual has immediate access to the electronic version of the train consist information for the train involved and the contact information for state-authorized local first responders required under proposed § 174.28. PHMSA notes that its above expectations regarding availability of, and capacity/knowledge of the railroad's designated emergency response contact are largely consistent with existing HMR emergency response telephone number requirements at § 172.604. PHMSA does not expect that person must necessarily be an employee of the railroad—provided a third party designee is available as contemplated above, and has immediate access to the information specified above. 30 PHMSA notes that this proposed requirement (which implements a mandate in Fast Act Section 7302(a)(1)(A)(iv)) provides additional defense-in-depth should emergency response personnel encounter delays in accessing electronic, real-time train consist information (pursuant to proposed § 174.28(a)) themselves, or railroad personnel fail to “push” electronic, real-time train consist information to state-authorized local first responders in a 10-mile radius of the accident or incident (pursuant to proposed § 174.28(b)).

PHMSA notes that its proposed approach of defining “train consist information” to accommodate both hard (printed) copy and electronic forms is essential to providing defense in depth ensuring safety-critical information is generated, updated, and available to emergency response personnel during an accident or incident. As discussed in Sections III.E.-F. above, electronic train consist information updated in real-time offers significant safety benefits compared to exclusive reliance on other sources of information—train crew statements, hard copy documentation, placarding and other HMR-mandated hazard communication tools—that can perish, be inaccessible, or prove unreliable in the critical moments immediately after an accident or incident. But, as commenters on the ANPRM noted (see Section III.G above), reliance on electronic train consist information alone would entail its own safety risks. For that reason, PHMSA understands that the regulatory definition of real-time “train consist information” should envision that information will be maintained in both hard (printed) copy and electronic forms. PHMSA acknowledges that this approach could entail some version control risks (from conflicts between the electronic and hard copy forms of train consist information) whose reduction by way of synchronization of hard copy and electronic forms could increase administrative and compliance burdens on railroads. However, PHMSA expects that those risks (which in any event could be controlled by the railroads) would be justified when compared against the anticipated safety benefits obtained from (1) improved accuracy from being able to verify train consist information in hard copy form against electronic records (and vice-versa), and (2) enhanced confidence that emergency response personnel will have access to accurate, safety-critical train consist information in some form, regardless of the circumstances of the accident or incident.

Section 174.26 currently requires railroads to provide each train crew a printed, hard copy document ( i.e., a record of information) reflecting the current position in the train of each rail car containing a hazardous material. This provision also requires the train crew to update the document to indicate changes in the placement of a hazardous material rail car within the train. Additionally, § 174.26(b) requires that the train crew must have a hard copy of a document showing the information required by part 172 ( e.g., shipping paper information), and emergency response information specified in § 172.604. The HMR's emergency response information standards at part 172, subpart G also contain requirements that (1) pursuant to § 172.600(c), railroads and other carriers make that hard copy information immediately available for use at all times hazardous material is present—by, for example, making it immediately available to a representative of a Federal, state, or local government agency responding to an incident involving a hazardous material or conducting an investigation that involves a hazardous material; and (2) pursuant to § 172.602(c)(1), railroads must maintain hard copy emergency response information that is immediately accessible to train crews in the event of an accident or incident involving hazardous materials.

Consistent with the FAST Act section 7302 mandate, PHMSA now proposes to supplement those existing requirements by amending § 174.26 in several ways to ensure that train consist information held in hard (printed) copy by train crews for all railroads is itself updated in real-time for accuracy based on changes in the hazardous material within the train consist, and that train crews ensure that their locally-maintained hard copies are at all times synced in real-time with electronic versions of the train consist information maintained off the train. Those proposed revisions to § 174.26 are as follows: (1) replace existing references in § 174.26 to the hard copy “document” memorializing train car position in this provision with references to the hard copy versions of the “train consist information” proposed at § 171.8; (2) specify the information to be included as part of the “train consist information;” (3) specify that a hard (printed) copy version of train consist information must be provided to train crews before initial train movement and maintained in a conspicuous location of an occupied locomotive during transportation, i.e., when the train crew is aboard the locomotive; (4) specify that train crews must update that local, hard (printed) copy version to reflect changes in the train consist information at intermediate stops before the train re-commences movement from those stops; and (5) specify that the train crews must also, as soon as practicable, update or notify the railroad to update the electronic form of train consist information maintained off the train to synchronize with the local hard (printed) copy of the train consist information employing (as appropriate) electronic devices compliant with the requirements of 49 CFR part 220. Train crews may use electronic or radio communications to notify the railroad to update the electronic train consist information. 31 This will ensure the accuracy of the train consist information.

PHMSA expects that its proposed regulatory amendments to § 174.26 are critical for supporting use of electronic, real-time train consist information as required by the FAST Act. As discussed at greater length in Section III.D. above, the locally maintained and updated, hard copy documents in the possession of train crews have been—for better or worse—the primary information relied on by emergency response personnel in identifying the hazards from historical rail accidents and incidents and executing immediate response actions. For this reason, PHMSA proposes that hard (printed) copy version of electronic train consist information is kept in an occupied locomotive such that train crews can immediately access that information and provide it to emergency response personnel. But electronic train consist information is not itself a cure-all; gapped or intermittent internet or phone connectivity in rural, small-town, and tribal areas can limit each of (1) the ability of AEIs to capture material changes in the train consist information, (2) the ability of train crews to report changes in the same by voice, or (3) access to electronic train consist information by emergency response personnel. 32 For these reasons, stakeholders in the emergency response community such as IAFC have called on retention of the train crew's hard copy requirement to backstop the accuracy of electronic train consist information. Similarly, the implementation costs and deployment delays associated with integration of more widespread use of AEIs to automatically update train consist information could be better managed by railroads if the HMR would continue to contemplate that train crews themselves could “call in” changes to train consist information as they occur and are memorialized on the hard copy version of train consist information. PHMSA also notes that its proposed multi-layered approach to ensuring train consist information is at all times accurate and consistent across hard copy and electronic media will ensure that train crews have situational awareness of changes in the train consist information that may be lost were all updates made automatically to off-train electronic train consist information.

PHMSA notes that its proposed revisions to § 174.26 would be applicable to all railroads—not just the Class I railroads explicitly addressed by the section 7302 Fast Act mandate. This approach is consistent with the current, broad scope of § 174.26, and as explained in Section II.C. above, this approach is also consistent with NTSB safety recommendation R-07-04, which was not limited to Class I railroads. PHMSA's proposed multi-layered approach also reflects the common-sense proposition that hazardous material entails the same hazards to public safety and the environment whether transported on Class I railroads or regional and short line railroads.

Current HMR requirements do not impose a crystal-clear requirement for railroads to ensure that safety-critical train consist information is available to emergency response personnel at all times, much less placed in the hands of emergency response personnel during an accident or incident involving rail transportation of hazardous material. Rather, the HMR speaks in terms of making such information “accessible” to train crews (§ 172.602(c)), “available” to first responders, emergency response officials, or law enforcement personnel (§ 172.600(c)), in the possession of train crews (§ 174.26(a)), and submitted to the National Response Center “as soon as practicable but no later than 12 hours after the occurrence of any incident . . .” (§ 171.15).

Section 7302 of the FAST Act requires PHMSA to issue regulations filling that gap by creating an explicit obligation for railroads to “provide” accurate, real-time train consist information in electronic form to first responders, emergency response officials, and law enforcement personnel involved in a rail accident or incident involving transportation of hazardous materials. As discussed in Section III.F. above, PHMSA understands that congressional mandate to “provide” real-time train consist information requires that railroads take concrete action both (1) by making that electronic train consist information available to emergency response personnel at all times, including before an accident or incident occurs; and (2) promptly after an accident or incident, ensuring that railroads take action to “push” that same electronic train consist information to state-authorized local first responders.

PHMSA consequently proposes a new § 174.28 implementing that FAST Act mandate. For the same reasons described in the above discussion of the proposed § 174.26, PHMSA proposes that this new provision's requirements would apply to all railroads, and not just those that were the subject of the FAST Act mandate. Consistent with PHMSA's understanding of congressional intent, paragraph (a) of this new provision would require all railroads to ensure that authorized first responders, emergency response officials, and law enforcement personnel along routes in which they transport hazardous material have access to up-to-date, electronic real-time train consist information at any time—including before an accident or incident occurs. PHMSA notes that this element of its new information-sharing requirements can help to address concerns regarding the effectiveness of any requirement for only post-accident/incident notification arising from (1) internet or phone connectivity gaps/intermittency, or (2) delayed or incomplete distribution of real-time electronic train consist by railroad personnel who may be juggling many tasks following reports of an accident or incident involving rail transportation of hazardous material. And, as discussed above in Sections III.F.-G., PHMSA understands that industry may already have tools (including the AskRail® system) that could be employed for this purpose without material modification—or could develop new platforms for this purpose.

Paragraph (b) within the new § 174.28 would establish an obligation for all railroads to supplement the above advance information sharing requirement with an explicit obligation for railroads to “push” electronic train consist information to state-authorized local first responders in a 10-mile radius of an accident or certain incidents promptly following notification to the railroad of the accident or incident. This proposed requirement would ensure that electronic, real-time train consist information would be forwarded in a timely manner to first responders that are either (1) in a community/jurisdiction that itself would be directly affected by release of hazardous materials during an accident or incident, or (2) in a neighboring community/jurisdiction that is closest, and therefore best-positioned to support response efforts in communities directly affected. PHMSA understands that this proposed requirement would be largely similar to the special permit conditions discussed in Section III.C. above. And at its core, this proposed requirement is performance-based: in scrutinizing compliance with this requirement, PHMSA will therefore focus on (1) before an accident or incident, ensuring that railroads have adopted protocols and resources providing a high degree of confidence that the “push” notifications will succeed in promptly placing train consist information in the hands of state-authorized local first responders needing it; and (2) after an accident or incident occurs, that those notifications did in fact reach those personnel in a timely manner. 33 Similarly, PHMSA will be less concerned with the particular tools ( e.g., instant message to mobile devices, email, fax notification functionalities within the AskRail® system) employed by railroads than on whether railroads have ensured that (1) their personnel have, in advance of rail transportation of hazardous material, a comprehensive, verified list of persons and pertinent contact information for authorized local first response personnel along a route, and (2) appropriate protocols and training for railroad personnel to ensure that such notifications can occur promptly following an accident or incident. As a backstop for that performance-based approach, PHMSA has within paragraph (b) included a straightforward, “one-size-fits-all” minimum 10-mile default radius that it believes strikes an appropriate balance between each of the safety benefits anticipated from a conservative advance notification requirement for the variety of hazardous materials moved across the nation's railroads, 34 and the need for an easily-executed baseline notification for railroad personnel amidst the confusion following an accident or incident. 35

PHMSA also proposes a new paragraph (c) implementing the FAST Act mandate direction that the exchange of real-time electronic train consist information provided for by PHMSA's proposals must be performed in a secure and confidential manner so as to protect proprietary and security-sensitive information, 36 and that regional and short line railroads be permitted to enter into memoranda of understanding with Class I railroads whose track they use to facilitate such transfers of train consist information to emergency response personnel  37 and directed toward information-sharing and identification of best practices. Those industry initiatives are backstopped by recent guidance issued by the Transportation Security Administration (TSA) in October 2022  38 directing (most) railroads to undertake a series of measures to reduce the risk of cybersecurity threats to their operations. PHMSA expects that railroads will be able to build on those existing resources to ensure that their execution of the requirements proposed in this NPRM are compliant with the new § 174.28(c). Further, PHMSA notes that nothing proposed in this NPRM would restrict railroads from collaborating on a platform ( e.g., the AskRail® system) for electronic sharing of accurate and real-time train consist information with authorized emergency response personnel, whether pursuant to a memorandum of understanding or other form of agreement.

PHMSA expects that given all the electronic options available, all railroads—even the smallest short line railroads—will be able to comply with the performance-based requirements of proposed § 174.28(a) through (c). By way of a hypothetical example, a short line that is only five miles in length and transports one or two hazardous materials rail car each month would not have to provide updates to the train consist information due to routine switching operations. Further, PHMSA envisions that railroad would be able to communicate with the local police and fire department(s) servicing its limited route to make arrangements for communication of the train consist information for the rail car using instant messaging, email, or even fax notification before movement of a train carrying hazardous material as well as following either an accident involving that train, or incident involving release (or suspected release) of hazardous material from that train. PHMSA believes that the railroad could satisfy each of § 174.28(a) through (c) by such arrangements to make its train consist information accessible at all times to emergency response personnel, and to ensure that state-authorized local first responders are “pushed” that information in the event of an accident or incident. Although PHMSA notes that the limited scope of the hazardous material transportation operations of this hypothetical short line railroad results in correspondingly lower compliance obligations under proposed § 174.28(a) through (c), not all railroads are similarly situated; larger Class I railroads, with more track and more extensive hazardous materials transportation operations, may need to adopt correspondingly more fulsome compliance protocols in satisfying the performance-based requirements at § 174.28(a) through (c). 39

Lastly, PHMSA has also included proposed language at paragraph (d)—that in the event that railroads employ technology ( e.g., the AskRail® system) in complying with the information sharing requirements within § 174.28(b)—prohibiting railroads and their personnel (or their designees) from withholding or causing to withhold electronic train consist information from emergency response personnel responding to an incident or accident. PHMSA's proposed regulatory language elaborates that railroads employing technology for such notifications must ensure that any such emergency response personnel have access to that software and the train consist information therein throughout the accident or incident—from the initial notification pursuant to § 174.28(b) until the conclusion of response and investigation efforts. PHMSA submits that this proposed language is another essential measure for backstopping the accident/incident notification performance standard at paragraph (b).

Statutory authority for this rulemaking is provided by the Federal hazardous materials transportation law (HMTA; 49 U.S.C. 5101 et seq. ). As discussed at greater length in Section II.B. above, section 5103(b) of the HMTA 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 has delegated this authority under the HMTA to the PHMSA Administrator at 49 CFR 1.97(b).

Executive Order 12866 (“Regulatory Planning and Review”), 40 as amended by Executive Order 14094 (“Modernizing Regulatory Review”), 41 requires that agencies “should assess all costs and benefits of available regulatory alternatives, including the alternative of not regulating.” Agencies should consider quantifiable measures and qualitative measures of costs and benefits that are difficult to quantify. Further, Executive Order 12866 requires that “agencies should select those [regulatory] approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity), unless a statute requires another regulatory approach.” Similarly, DOT Order 2100.6A (“Rulemaking and Guidance Procedures”) requires that regulations issued by PHMSA and other DOT Operating Administrations should consider an assessment of the potential benefits, costs, and other important impacts of the proposed action and should quantify (to the extent practicable) the benefits, costs, and any significant distributional impacts, including any environmental impacts.

Executive Order 12866 and DOT Order 2100.6A require that PHMSA submit “significant regulatory actions” to the Office of Management and Budget (OMB) for review. This rulemaking is not considered a significant regulatory action under section 3(f) of Executive Order 12866 (as amended) and, therefore, was not formally reviewed by OMB. This rulemaking is also not considered a significant rule under DOT Order 2100.6A.

The following is a brief summary and table of costs, savings, and net benefits of some of the amendments proposed in this notice. PHMSA has developed a more detailed economic analysis in the PRIA, a copy of which has been placed in the docket. PHMSA seeks public comment on its proposed revisions to the HMR and the preliminary cost and benefit analyses in the PRIA.

PHMSA has preliminarily determined that the proposed action would impact seven Class I railroads, 11 Class II railroads, and 585 Class III railroads. PHMSA estimates the undiscounted total cost of the rulemaking over the 10-year analysis period to be about $46.3 million in 2021 dollars, for an average annual cost of $4.6 million. The discounted total cost of the rulemaking is estimated to be about $32.8 million at a 7 percent discount rate. Further, PHMSA notes that the benefits of the proposed action are difficult to quantify as it is reliant on the degree to which having real-time access to train consist information improves emergency responders' ability to respond to rail incidents. Based on lessons learned from major hazardous material incidents on rail, PHMSA anticipates the proposed action would improve emergency responders' ability to promptly identify all the hazardous materials cars and hazardous material contained therein that are involved in an accident or investigation and to timely assess the threat from a hazardous materials release. This would likely reduce injuries and fatalities, material loss and response costs, and delays caused by closures. PHMSA estimated the annual damage cost of hazardous material incidents on rail that could be impacted by the proposed action to be about $15.6 million in 2021 dollars. Therefore, the proposed rule would have to reduce damage costs by about 30 percent for the monetized benefits of the proposed rule to equal costs. The following table summarizes the quantified annual costs and qualified benefits of the major provisions of this rulemaking.

As illustrated by the Norfolk Southern train derailment at East Palestine, OH, such incidents can have substantial consequences that are not captured by this regulatory impact analysis, including the long-term environmental concerns and health risks (both physiological and psychological) for residents. Research also shows that such incidents can have significant impacts on property values, which, in turn, can slow down economic activity in the area. 42 Additionally, of the 140,000 total route-miles of track in the United States, 104,000 miles are in rural and tribal areas, suggesting that train related hazardous material incidents mainly happen in areas populated by disadvantaged communities. 43 Time is of the essence during the initial stages of emergency response to a hazardous materials incident. Reducing the lag in provision of critical hazardous material identification and response information during rail hazardous materials incidents will provide environmental and safety benefits, although these benefits are difficult to quantify. PHMSA acknowledges and considers these unquantified benefits in selecting the provisions of the proposed rulemaking.

PHMSA analyzed this rulemaking in accordance with the principles and criteria contained in Executive Order 13132 (“Federalism”)  44 and the presidential memorandum (“Preemption”). 45 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.”

The Federal hazardous materials transportation law contains an express preemption provision at 49 U.S.C. 5125(a) in the event compliance with a state, local, or Indian tribe requirement is not possible or presents an obstacle to compliance. Additionally, the Federal hazardous materials transportation law contains an express preemption provision at 49 U.S.C.5125(b) that preempts state, local, and Indian tribal requirements on the following covered 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 materials; and

(5) The design, manufacture, fabrication, inspection, marking, maintenance, recondition, repair, or testing of a packaging or container represented, marked, certified, or sold as qualified for use in transporting hazardous materials in commerce.

This proposed rule addresses covered subject items (3) and (4) above and is expected to preempt state, local, and Indian tribe requirements not meeting the “substantively the same” standard. In this instance, the preemptive effect of the proposed rule is necessary to achieve the objectives of the FAST Act and the hazardous materials transportation law under which the proposed rule is promulgated. The proposed rule is not expected to have substantial direct effects on states, the relationship between the national government and states, or the distribution of power and responsibilities among the various levels of government. Therefore, PHMSA has preliminarily concluded that the consultation and funding requirements of Executive Order 13132 do not apply.

PHMSA analyzed this propose rulemaking in accordance with the principles and criteria contained in Executive Order 13175 (“Consultation and Coordination with Indian Tribal Governments”)  46 and DOT Order 5301.1 (“Department of Transportation Policies, Programs, and Procedures Affecting American Indians, Alaska Natives, and Tribes”). Executive Order 13175 and DOT Order 5301.1 require DOT 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 Native American tribes.

PHMSA assessed the impact of this proposed action and has preliminarily determined that it will not significantly or uniquely affect tribal communities or Native American tribal governments. The changes to the rail transportation requirements in the HMR as part of this proposed action have national scope, and also are limited to establishing baseline requirements for the compilation, updating, and electronic exchange of hazardous materials information between railroads and first responders, emergency response officials and law enforcement personnel; PHMSA, therefore, does not expect this action to significantly or uniquely affect tribal communities, nor impose substantial compliance costs on Native American tribal governments or mandate tribal action. This rulemaking would not adversely affect the safe transportation of hazardous materials therefore, it would not cause disproportionately high adverse risks for tribal communities. For these reasons, the funding and consultation requirements of Executive Order 13175 and DOT Order 5301.1 to apply. However, PHMSA solicits comment from Native American tribal governments and communities on potential impacts of the proposed rulemaking.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) requires agencies to review regulations to assess their impact on small entities, unless the agency head certifies that a rulemaking will not have a significant economic impact on a substantial number of small entities including small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations under 50,000. The Regulatory Flexibility Act directs agencies to establish exceptions and differing compliance standards for small businesses, where possible to do so and still meet the objectives of applicable regulatory statutes. Executive Order 13272 (“Proper Consideration of Small Entities in Agency Rulemaking”) requires agencies to establish procedures and policies to promote compliance with the Regulatory Flexibility Act and to “thoroughly review draft rules to assess and take appropriate account of the potential impact” of the rules on small businesses, governmental jurisdictions, and small organizations. The DOT posts its implementing guidance on a dedicated web page. 47

This proposed rule has been developed in accordance with Executive Order 13272 and with 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. This proposed action promotes the exchange of information about hazardous material on a train between railroads and emergency response personal and law enforcement for the benefit of response to or investigation of accidents or emergencies involving a train transporting hazardous material. The proposed action applies to railroads, some of which are small entities, such as regional and short line railroads. As discussed at length in the PRIA—posted in the rulemaking docket—the proposed action will not, if adopted as proposed, have a significant economic impact on a substantial number of small entities.

PHMSA determined that all 585 Class III railroads (100%) and 10 Class II railroads (91%) can be considered small entities. None of the Class I railroads can be considered small entities.

According to ASLRRA's report, in 2017, the average annual revenues of a Class II and Class III railroads were approximately $79 million and $4.75 million, respectively. PHMSA converted these into 2021 dollars by using a deflation index of 1.1202, resulting in an average annual revenue of $88.5 million and $5.32 million for Class II and Class III, respectively. 31 Based on estimates, for Class II and III railroads, the per railroad undiscounted average annual cost of the proposed rule is $5,473 (2021$).