September 28, 2001

The Honorable Michael P. Jackson
Deputy Secretary
Department of Transportation
400 Seventh Street, SW
Washington, DC 20590

Dear Mr. Jackson:

     On September 25, 2001, the Office of Management and Budget (OMB) completed review of a United States Coast Guard (USCG) draft proposed rule, titled "Tank Level or Pressure Monitoring Devices" (TLPM devices), under Executive Order 12866. The rule would establish standards for devices that measure oil levels in single hull vessel cargo tanks as well as establish requirements for the use of these devices. The requirements are intended to reduce the size and impact of oil spills by alerting the tank vessel operator that an accidental discharge of oil is occurring.

     In December 2000, the Coast Guard was directed in a U.S. Court of Appeals response to a suit brought by environmental groups to issue regulations that would establish standards and require their use, consistent with the mandate contained in Section 4110 of the Oil Pollution Act (OPA) of 1990. Earlier, in 1997, the Coast Guard had issued a temporary rule requesting the submission of TLPM devices that would meet a performance standard for detecting spills of a certain size (e.g., the lesser of 1000 gallons or 0.5 percent below the quantity to which the tank as loaded). However, no devices to meet this standard were devised and the temporary rule expired in 1999.

     In response to the suit, the proposed rule submitted for our review sets forth eight options with different categories of tank vessel types, performance standards (1 to 3% rather than 0.5%), phase in (3 to 5 years), and use requirements. The costs of these options range between $64 and $211 million in present value costs with most of the cost incurred during an initial 3 to 5 year phase in period.

     The Coast Guard's regulatory analysis shows that the likely benefits of the proposed rule are small, ranging between 210 and 1,380 barrels not spilled. The analysis shows that for values ranging between $2,000 and $100,000 per barrel not spilled, the most effective option would generate a net cost to society (costs in excess of benefits) of $12 to $64 million annually. A least cost option of $64 million with a phase in of 5 years would save only 211 barrels, yielding benefits (if valued at $2,000 per barrel) of less than $0.5 million. The Coast Guard analysis notes that of all the major Oil Pollution Act rulemakings issued since 1990, this rule would (with one exception) be the least cost-effective.

     We recognize that the Department is striving to meet a judicial deadline that has been established with the Appeals Court and must also promulgate a rule that meets the "use" requirements of Section 4110 of OPA. We also appreciate the efforts of the Department to work with our staff and to incorporate modifications into the preamble and the regulatory evaluation. However, it appears that none of the options available under the statute would result in net benefits to society.

     In light of the potential adverse effects, Coast Guard has noted in the preamble that it "will share with Congress any information provided by the public that addresses the reasonableness of implementing the statute". Based on the rulemaking record, we would also appreciate Departmental views on whether the Administration should seek legislative relief in order to mitigate these adverse impacts. Our staff is available for further discussion with you on the concerns that have been raised. We look forward to working with you to effectively implement this important effort.



John D. Graham
Office of Information and Regulatory Affairs