American Coatings Association

Last month, ACA sent a letter to the U.S. Senate Appropriations Committee and its Transportation, Housing and Urban Development (THUD) Appropriations Subcommittee, opposing proposals in the THUD Appropriations FY 2012 bill that would impose user fees on applicants for special permits and approvals issued by the Department of Transportation’s (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA).

The letter, signed by ACA as part of a coalition representing industries engaged in transportation of hazardous materials, urged the Appropriations Subcommittee to reject the PHMSA proposal because such proposals to assess user fees on applicants for hazardous materials special permits and approvals are not fair or equitable and would stifle industry’s ability to innovate and produce goods in this fragile economic recovery.

President Obama’s FY 2012 budget request contained a proposal to assess a user fee on applicants for special permits and approvals as a way to fund PHMSA’s new hazardous materials special permits and approvals program. ACA believes these new changes to the program were not necessary as the safety record of holders of special permits and approvals is exemplary.

Investigations into the Special Permits and Approvals program in the last Congress revealed that PHMSA had misplaced many documents from applications. Instead of asking holders of these authorities to provide the missing documents, PHMSA proceeded without notice and comment to restructure the program from one that took weeks to process applications to one that takes months, with double to triple the paperwork, and to establish a complex tiered system of applications reviews, including costly site visits, based on unpublished and unknown standards. To support this new processing hierarchy, the Administration proposed a user tax of between $700 and $3,000 per application.

While the THUD Appropriations Subcommittee may propose a modification of the proposal, assessing $600 per application, ACA believes that any iteration of such a user fee is without merit. Specifically, ACA underscored a litany of compelling arguments in opposition to a user fee, including the following:

• Currently, DOT has no authority to assess a user fee on special permit or approval applications. Furthermore, the Senate Commerce Committee is not proposing a user fee in legislation it is developing to reauthorize the Hazardous Materials Transportation Act.

• The Administration estimates that it needs $6.691 million to administer the new special permits and approvals program. Even at the “reduced” fee of $600 per application, PHMSA will collect $18.4 million based on current rates of special permit and approval applications.

• 43% of the user tax revenue would be used to underwrite the agency’s general fund, although only a fraction of the regulated community are holders of special permits and approvals.

• The government is the largest holder of approvals and special permits. The government will pay no fees.

• Historically, fees have not been imposed on foreign entities for fear of retaliatory fees on U.S. exports giving foreign shippers a competitive advantage in the United States.

• PHMSA’s new programmatic changes that eliminated association-sponsored permits, curtail “family” approvals, and expand circumstances triggering the need for classification approvals have driven the number of applications up 70% between 2009 and 2011. Despite statutory directives to the contrary, these procedural and policy changes were made without the benefit of notice and comment rulemaking. As such, PHMSA’s new processing burdens are, in the agency’s words, “self-made.” The regulated community is already paying for these non-risk based changes as processing times have tripled (or more) and business opportunities are lost or delayed.

• Part of the revenue will have to be used to hire additional federal workers to administer and collect the tax.

• It is the business activity, not the size of a company, that determines how many applications may be filed. Many payers will be small businesses.

• With the fee, there would be no incentive for PHMSA to incorporate proven special permits into the hazardous materials regulations (HMR). Many companies are locked into the special permits program because PHMSA has failed to timely incorporate these requirements into the HMR.

• The fee would be payable for new applications, renewals, and modifications. There would be an incentive for PHMSA to deny applications on trivial pretexts, thus generating new fees.

• Other DOT modal administrations issue approvals or what amount to special permits; none assess fees.

• This program, which provides safety benefits to the public, has been successfully run for decades without user fees. PHMSA’s proposal could be the start of a trend for user fees for other regulatory actions including letters of interpretations or petitions for rulemaking necessary for compliance and good government.

Finally, ACA noted that in an effort to address the nation’s current fiscal challenges, the White House Office of Management and Budget issued guidance to agencies preparing budget requests for FY 2013. The guidance directs agencies to submit requests with reductions from the FY 2011 enacted levels of 5% and 10%. These reductions are not to be achieved by proposing “across-the-board reductions or reductions to mandatory spending in appropriations bills, reclassifications of existing discretionary spending to mandatory, or enactment of new user fees to offset existing spending.”