[Federal Register Volume 75, Number 235 (Wednesday, December 8, 2010)]
[Proposed Rules]
[Pages 76345-76351]
[FR Doc No: 2010-30836]

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DEPARTMENT OF TRANSPORTATION

Federal Railroad Administration

49 CFR Chapter II

[Docket No. FRA-2009-0038]
RIN 2130-AC11

Risk Reduction Program

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

ACTION: Advance notice of proposed rulemaking (ANPRM).

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SUMMARY: The Rail Safety Improvement Act of 2008 requires the
development and implementation of railroad safety risk reduction
programs. Risk reduction is a comprehensive, system-oriented approach
to safety that determines an operation's level of risk by identifying
and analyzing applicable hazards and develops plans to mitigate that
risk. Each Risk Reduction Program (RRP) is statutorily required to be
supported by a risk analysis and a Risk Reduction Program Plan (RRPP),
which must include a Technology Implementation Plan and a Fatigue
Management Plan.
    This ANPRM solicits public comment on a potential rulemaking that
would require each Class I railroad, each railroad with an inadequate
safety record, and each passenger railroad to submit an RRPP to FRA for
its review and approval. Each of those railroads would ultimately be
required to implement its approved RRP.

DATES: Written comments must be received by February 7, 2011. Comments
received after that date will be considered to the extent possible
without incurring additional expenses or delays.
    After all public comments are received, FRA may hold a public
hearing on a date to be announced in a forthcoming notice. The focus of
the meeting would be on issues raised in the submitted comments.

ADDRESSES: Comments: Comments related to Docket No. FRA-2009-0038 may
be submitted by any of the following methods:
     Online: Comments should be filed at the Federal
eRulemaking Portal, http://www.regulations.gov. Follow the online
instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: Docket Management Facility, U.S. DOT, 1200 New
Jersey Avenue, SE., W12-140, Washington, DC 20590.
     Hand Delivery: Room W12-140 on the Ground level of the
West Building, 1200 New Jersey Avenue, SE., Washington, DC between 9
a.m. and 5 p.m. Monday through Friday, except Federal holidays.
    Instructions: All submissions must include the agency name and
docket number or Regulatory Identification Number (RIN) for this
rulemaking. Note that all comments received will be posted without
change to http://www.regulations.gov including any personal
information. Please see the Privacy Act heading in the SUPPLEMENTARY
INFORMATION section of this document for Privacy Act information
related to any submitted comments or materials.

FOR FURTHER INFORMATION CONTACT: Miriam Kloeppel, Staff Director, Risk
Reduction Program Division, Office of Safety Analysis, FRA, 1200 New
Jersey Avenue, SE., Mail Stop 25, Washington, DC 20590 (telephone: 202-
493-6224<EMAIL_ADDRESS>Elizabeth A. Gross, Trial Attorney,
Office of Chief Counsel, FRA, 1200 New Jersey Avenue, SE., Mail Stop
10, Washington, DC 20590 (telephone:<PHONE_NUMBER>),
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Background

    In section 103 of the Rail Safety Improvement Act of 2008, Public
Law 110-432, 122 Stat. 4854 (Oct. 16, 2008) (codified at 49 U.S.C.
20156) (hereinafter RSIA), Congress directed the Secretary of
Transportation to issue a regulation by October 16, 2012, requiring
certain railroads to develop a Risk Reduction Program (RRP). While

the statute vests certain responsibilities with the Secretary of the
U.S. DOT (Secretary), the Secretary has since delegated those
responsibilities to the FRA Administrator. See 49 CFR 1.49(oo); 74 FR
26981 (June 5, 2009); see also 49 U.S.C. 103(g).
    Each railroad subject to the regulation would have to develop and
implement an RRP approved by FRA. See 49 U.S.C. 20156(a)(1). This RRP
is required to be supported by an RRPP. See 49 U.S.C. 20156(d)(2). FRA
would also conduct an annual review to ensure that each railroad has
complied with its RRP. See 49 U.S.C. 20156(a)(3). The RSIA mandates
that the following three categories of railroads be required to develop
and implement an FRA-approved RRP:
    (1) Class I railroads;
    (2) Railroad carriers with inadequate safety performance, as
determined by the Secretary; and
    (3) Railroad carriers that provide intercity rail passenger or
commuter rail passenger transportation (passenger railroads).
    See 49 U.S.C. 20156(a)(1).
    In accordance with the RSIA mandate, this ANPRM announces the
initiation of an RRP rulemaking applicable to the above railroads.
Railroads not required to implement RRPs under the RSIA would be
permitted to voluntarily submit plans meeting the requirements of any
final RRP regulation for FRA review and approval. See 49 U.S.C.
20156(a)(4).

II. Related Proceeding

    With the assistance of the Railroad Safety Advisory Committee
(RSAC), FRA is currently developing a System Safety Program (SSP)
regulation applicable to passenger railroads. An SSP is anticipated to
be a comprehensive process for the application of engineering and
management principles, criteria, and techniques to optimize safety.
Like risk reduction, an SSP might require a railroad to assess and
manage risk, and to develop proactive hazard management methods that
would support safety improvement. As currently envisioned, SSP would be
specifically tailored to the risks presented by passenger railroads. To
the extent possible, FRA intends to incorporate risk reduction
requirements into a complimentary safety and risk reduction framework.

III. RSIA RRP Requirements

    Under the RSIA, each RRP required to be submitted by a railroad
must contain certain components. As a general matter, an RRP is
required to systematically evaluate safety risks on a railroad's system
and to manage those risks to reduce the consequences and rates of
railroad accidents, incidents, injuries, and fatalities. See 49 U.S.C.
20156(a)(1)(A). The RRP will help achieve this goal by mitigating
aspects that increase railroad safety risks and enhancing aspects that
decrease railroad safety risks. Id. Each RRP must contain a risk-based
hazard analysis \1\ and must be supported by an RRPP describing the
processes, procedures and resources that are committed to supporting
the RRP.\2\ For example, the RRPP must describe the organizational
functions and procedures that a railroad will utilize in developing,
implementing, and evaluating its RRP. In addition, an RRPP must also
incorporate a Technology Implementation Plan and a Fatigue Management
Plan.
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    \1\ The RSIA uses the phrase ``risk analysis'' to describe the
type of analysis a railroad is required to perform. For purposes of
this ANPRM and any final rule, however, FRA will refer to this
analysis as a ``risk-based hazard analysis.'' This terminology
clarifies that safety hazard risks are the concern of the
rulemaking, as opposed to financial or other types of risk.
Additionally, this harmonizes the risk reduction rulemaking with the
terminology currently being utilized by the SSP rulemaking.
    \2\ The RSIA uses the phrases ``comprehensive safety risk
reduction program'' and ``risk mitigation plan'' to describe the
plan that must accompany and support an RRP submitted by a railroad
to the FRA for approval. For purposes of this ANPRM, however, FRA
will refer to this plan as an RRPP.
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A. Risk-Based Hazard Analysis

    Each railroad required to implement an RRP would conduct a risk-
based hazard analysis that would be submitted along with the railroad's
RRPP. See 49 U.S.C. 20156(c). FRA would likely expect a risk-based
hazard analysis to identify and analyze the following factors that
affect railroad safety:
     Operating rules and practices;
     Infrastructure;
     Equipment;
     Employee staffing levels and schedules;
     Management structure;
     Employee training; and
     Other matters that impact railroad safety.
    A railroad would not be required to limit its risk-based hazard
analysis to the above identified factors, and FRA may require a
railroad to consider these and/or additional factors in any proposed or
final rule. However, the contents of a railroad's risk mitigation RRPP
would be based upon the results of the railroad's completed risk-based
hazard analysis. See 49 U.S.C. 20156(d)(1).

B. Technology Implementation Plan and Positive Train Control Systems

    An RRPP must include a Technology Implementation Plan (TIP) that
describes the railroad's plan for the ``development, implementation,
maintenance, and use of current, new, or novel technologies on its
system over a 10-year period to reduce safety risks identified under
the railroad safety risk reduction program.'' 49 U.S.C. 20156(e)(1). At
a minimum, a TIP must contain (1) a technology analysis addressing the
safety impact, feasibility, and costs and benefits of implementing
technologies, and (2) a 10-year implementation schedule prioritizing
the development and implementation of new technology. See 49 U.S.C.
20156(e)(2) and (e)(3).
    The RSIA also contains several provisions regarding a railroad's
TIP and the implementation of positive train control (PTC) systems.
These provisions, however, apply only to the extent that a railroad is
not already required to implement a PTC system under section 104 of the
RSIA. Under section 104, certain railroads--including all Class I and
passenger railroads--are required to implement PTC systems by December
31, 2015. See 49 U.S.C. 20156(e)(4) and 20157(a). Therefore, the RSIA's
provisions (other than those in section 104) regarding PTC systems
would apply only to railroads determined to have an inadequate safety
record. Possible methodologies FRA could use to determine whether a
railroad has an inadequate safety record are discussed later in this
ANPRM.
    While there is no general requirement in the RSIA that all
railroads with an inadequate safety record must address PTC systems in
their TIPs, the RSIA does contain the following provisions regarding
PTC systems:
     If a railroad's TIP contains an implementation schedule
for a PTC system, the railroad must comply with that schedule. See 49
U.S.C. 20156(e)(4)(A).
     If a railroad is required to submit a TIP that addresses
PTC systems, that railroad must implement such a PTC system pursuant to
its TIP by December 31, 2018. See 49 U.S.C. 20156(e)(4)(B).
    The above provisions mean that a railroad voluntarily submitting a
TIP addressing the implementation of a PTC system would not have to
comply with the December 31, 2018 implementation deadline. Rather, such
a railroad would only be required to comply with the implementation
schedule contained in its own TIP. The December 31, 2018 deadline would
apply only to a railroad with an inadequate safety record that

FRA specifically requires to implement PTC.

C. Fatigue Management Plan

    Each RRPP must include a Fatigue Management Plan (FMP) that will be
designed to reduce the likelihood of accidents, incidents, injuries,
and fatalities caused by the fatigue of safety-related railroad
employees. See 49 U.S.C. 20156(f)(1). A railroad will have to update
its FMP every two years. Id. An FMP should accomplish this by
prescribing appropriate fatigue countermeasures, taking into account
the various operating circumstances on the different parts of a
railroad system. See 49 U.S.C. 20156(f)(2). A railroad would also have
to consider whether its FMP should include elements addressing the
following:
     Employee education and training on the physiological and
human factors that affect fatigue, as well as strategies to reduce or
mitigate the effects of fatigue, based on the most current scientific
and medical research and literature.
     Opportunities for identification, diagnosis, and treatment
of any medical condition that may affect alertness or fatigue,
including sleep disorders.
     Effects on employee fatigue of an employee's short-term or
sustained response to emergency situations, such as derailments and
natural disasters, or engagement in other intensive working conditions.
     Scheduling practices for employees, including innovative
scheduling practices, on-duty call practices, work and rest cycles,
increased consecutive days off for employees, changes in shift
patterns, appropriate scheduling practices for varying types of work,
and other aspects of employee scheduling that would reduce employee
fatigue and cumulative sleep loss.
     Methods to minimize accidents and incidents that occur as
a result of working at times when scientific and medical research have
shown increased fatigue disrupts employees' circadian rhythm.
     Alertness strategies, such as policies on napping, to
address acute drowsiness and fatigue while an employee is on duty.
     Opportunities to obtain restful sleep at lodging
facilities, including employee sleeping quarters provided by the
railroad carrier.
     The increase of the number of consecutive hours of off-
duty rest, during which an employee receives no communication from the
employing railroad carrier or its managers, supervisors, officers, or
agents.
     Avoidance of abrupt changes in rest cycles for employees.
     Additional elements that the Secretary considers
appropriate.

See 49 U.S.C. 20156(f)(3)(A)-(J).

D. Consensus Requirements

    Each railroad submitting an RRP must consult on the contents of the
plan in good faith with all of its directly affected railroad employees
and any non-profit employee labor organization representing directly
affected employees. See 49 U.S.C. 20156(g)(1). If the railroad cannot
reach a consensus on the proposed contents with the employees or the
labor organization, the employees or the labor organization may file a
statement with FRA explaining their views on the RRP on which consensus
was not reached. See 49 U.S.C. 20156(g)(2). FRA is required to consider
such views during the review and approval of the RRP. Id.

E. Protection of Confidential Information

1. FOIA Protection
    Under section 109 of the RSIA, 49 U.S.C. 20118(a), certain
information submitted to FRA pursuant to an RRP or risk reduction pilot
project is prohibited from disclosure under the Freedom of Information
Act, 5 U.S.C. 552, (``FOIA''), except as necessary for the Secretary or
another Federal agency to enforce or carry out any provision of Federal
law. This prohibition applies to any part of any record that FRA
receives, inspects, or copies pursuant to an RRP or pilot project,
including (but not limited to) a railroad's analysis of its safety
risks and its statement of identified mitigation measures. Id. This
prohibition, however, is subject to the exception that FRA may disclose
information otherwise available to the public if FRA determines that
disclosure would be consistent with the confidentiality needed for an
RRP or pilot program. See 49 U.S.C. 20118(b).
    In addition, FRA may also prohibit disclosure of risk analyses or
risk mitigation analyses obtained under other provisions, regulations,
or orders promulgated under 49 U.S.C. chapter 201, if FRA determines
that the prohibition of public disclosure is necessary to promote
railroad safety. See 49 U.S.C. 20118(c).
2. Protection From Discovery
    The RSIA also directs FRA to conduct a study evaluating whether it
is in the public interest to withhold certain risk reduction
information from discovery or admission into evidence in Federal or
State court proceedings against a railroad that involve personal injury
or wrongful death. See 49 U.S.C. 20119(a). In conducting this study,
FRA must take into account both public safety and the legal rights of
persons injured in railroad accidents, and must solicit input from
railroads, railroad non-profit employee labor organizations, railroad
accident victims and their families, and the general public. Id. The
risk reduction information that is the subject of the study would
include any report, survey, schedule, list, or data compiled or
collected for the purpose of evaluating, planning, or implementing a
railroad RRP that is required under 49 U.S.C. chapter 201, including a
railroad's analysis of safety risks and its statement of mitigation
measures with which it will address those risks. Id. FRA may then issue
a rule addressing the results of this study, so long as the rule is in
the public interest (including public safety and the legal rights of
persons injured in railroad accidents). See 49 U.S.C. 20119(b). Any
such rule may not go into effect until one year after its adoption. Id.
    FRA anticipates that it will complete this study within one to two
years. The public will have an opportunity to comment on the
information collection requirements of this study through FRA's
obligation under the Paperwork Reduction Act.

IV. FRA's Risk Reduction Initiative

    Although FRA's traditional rule-based system has been effective at
establishing minimum safety standards, additional safety improvements
could be achieved through the establishment of risk reduction programs.
FRA's risk reduction initiative utilizes an approach based on (1)
voluntary risk reduction programs in the railroad industry, and (2)
changes to FRA's internal safety culture to maximize the agency's
ability to improve railroad safety. FRA envisions that the RRP and SSP
regulations discussed in this ANPRM will enhance this broad approach.
Risk reduction is a problem-solving process used to identify and
mitigate railroad safety risks. Its objective is to develop innovative
methods, processes, and technologies that can be used to identify and
mitigate railroad safety risk factors proactively instead of
reactively, so that risks are effectively counteracted before an
accident, injury, or fatality occurs.
    Overall, a risk reduction approach could help railroads, FRA, and
labor organizations learn how unsafe events may occur and identify
underlying conditions that contribute to unsafe events. This knowledge
will then provide a means to effectively prevent those unsafe events.
When fully implemented, FRA intends that its

broad risk reduction initiative will help identify systemic factors
that can address multiple railroad safety problems. Risk reduction will
also help to identify, track, and evaluate corrective actions taken by
railroads, and could help reveal previously hidden safety information
for analysis and problem solving.

A. Voluntary Risk Reduction Programs

    Before the passage of RSIA, FRA worked with railroads and labor
organizations to develop voluntary proactive safety programs designed
to improve railroad safety and build strong safety cultures. Various
programs, such as the Confidential Close Call Reporting Systems
(C\3\RS) (OMB No. 2130-0574), Crew Resource Management model training
programs, and Clear Signal for Action (CSA) behavior-based safety
programs (as well as many others), contained elements that made them
(or other programs like them) appropriate for consideration as
voluntary programs under the risk reduction umbrella. These elements
include commitments from all stakeholders; voluntary, confidential, and
non-punitive participation; systematic and objective data gathering,
analysis, and reporting; problem-solving and corrective actions; and
long-term sustaining mechanisms. FRA's risk reduction initiative will
continue to encourage the development and implementation of voluntary
programs focusing on proactive risk mitigation.

B. FRA's Internal Risk Reduction Program

    As a regulator, FRA recognizes that the presence of a strong
internal safety culture increases its ability to improve railroad
safety. A strong internal safety culture enables the agency to overcome
institutional ``stovepipe'' barriers that inhibit the free flow of
information within the agency and can help the entire agency focus
effectively on railroad safety issues. To help the agency identify new
processes or methods for improving railroad safety, FRA is developing
its own internal risk reduction program. This program will provide
support and guidance to several FRA teams working on internal pilot
studies that would address specific railroad safety issues.

C. Risk Reduction Pilot Programs

    The RSIA authorized FRA to conduct research and pilot programs
related to risk reduction. See 49 U.S.C. 20156(a)(2). FRA intends to
use the information and experience gathered through these pilot
programs to develop the RRP regulation. Id.
    On May 29, 2009, FRA published a Broad Agency Announcement (BAA)
soliciting proposals for risk reduction pilot programs. See Department
of Transportation (Federal Railroad Administration), ``Limited
Competition of the Federal Railroad Administration Risk Reduction
Program/Broad Agency Announcement,'' Special Notice, Solicitation
Number: DTFR53-09-M-0000, available at: https://www.fbo.gov/index?s=opportunity&mode=form&id=0ea229f12915fda77cfc84b4dbc6ef9a&tab=core&_cview=0. FRA limited competition under the BAA to Class I
railroads, many of which were already developing proactive safety
programs. This allowed FRA to increase the speed of generating pilot
projects results to help develop the RRP regulation required by RSIA.
The BAA requested proposals from the Class I railroads for pilot
projects that targeted operations, equipment, or systems that posed the
greatest risk to operational and personal safety. FRA evaluated the
proposals and announced in September 2009 that Risk Reduction Pilot
Program Grant Awards had been awarded to the National Railroad
Passenger Corporation (Amtrak); BNSF Railway Company; Canadian Pacific
Railway; CSX Transportation, Inc.; Norfolk Southern Corporation; and
Union Pacific Railroad Company.
    FRA is currently monitoring these pilot programs and gathering
information and results that will assist in the development of the
subject RRP regulation. FRA anticipates that many of these pilot
projects will have a life span beyond the publication of the final risk
reduction regulation, and many of them may ultimately become part of a
railroad's FRA-approved RRP.

V. Advance Notice of Proposed Rulemaking

    In accordance with the RSIA mandate, this ANPRM announces the
initiation of an RRP rulemaking. This ANPRM requests written comments
in response to the questions presented. FRA also welcomes any
additional information that may be helpful in considering a risk
reduction framework for railroad carriers. FRA is not proposing any
specific regulatory language in this ANPRM. After a review of all the
comments submitted in response to this ANPRM, FRA will likely issue a
notice of proposed rulemaking (NPRM) proposing specific risk reduction
program regulations. Interested persons will have the opportunity to
comment on a proposed regulation prior to the adoption of any final
regulation regarding risk reduction.

A. Identifying Railroads With an Inadequate Safety Record

    FRA is particularly interested in soliciting input regarding how to
determine whether a railroad has an ``inadequate safety record'' under
49 U.S.C. 20156(a)(1) and thus would be required to develop and
implement an RRP. The RSIA does not provide guidance on how this
determination should be made. FRA is currently considering an approach
in which a variety of safety factors would be analyzed and weighed when
making the determination. Such possible factors could include:
     The railroad's safety performance within the last five (5)
years, as measured by the number of occurrences per million train-miles
of the following:
    [cir] Fatal accidents/incidents reportable under 49 CFR part 225
(not including accidents/incidents occurring at highway-rail grade
crossings, unless caused by a railroad's failure to comply with a
railroad operating rule or a Federal statute or regulation).
    [cir] The number, severity, and types (e.g., head-on collisions
between pieces of on-track equipment) of accidents/incidents reportable
under 49 CFR part 225.
    [cir] Non-accident hazardous materials releases.
    [cir] FRA safety violations/deficiencies.
     How the railroad's measured safety performance compares
with other railroads of similar size and operations.
     Any serious accident/incident involving hazardous
materials and whether any such accident/incident led to an evacuation,
environmental damage, or a personal injury/fatality.
     Any recommendations made by an FRA Regional Administrator
(with detailed supporting reasons provided) identifying a railroad with
an inadequate safety record.
     The proportion of the railroad's territory that is
excepted track under 49 CFR 213.4. Railroads may designate a segment of
track as excepted track subject to certain conditions. Id. For example,
on excepted track a railroad may not operate trains in excess of ten
miles an hour, operate occupied passenger trains, or operate freight
trains containing more than five cars containing hazardous materials.
See Sec.  213.4(e)(1)-(e)(3). Excepted track is then subject to less
stringent track safety standards. See 49 CFR 213.5.
    FRA does not anticipate that all these factors would necessarily be
weighted equally. Additionally, a determination relating to the
adequacy of a railroad's safety record could be based upon any number
of factors, depending upon the

severity of the safety concern involved. FRA would likely consider such
factors as fatalities, accidents/incidents, non-accident hazmat
releases, and FRA safety violations/deficiencies, using statistical
models that compare the railroad's performance to the industry average
or an FRA threshold established on a periodic basis (e.g., yearly).
Rates above a certain threshold would then likely cause FRA to
determine that a railroad has an inadequate safety record. In order for
FRA to determine that a railroad no longer has an inadequate safety
record, the railroad may then need to be below all applicable
thresholds for a set period of time (e.g., three years).
    Additional factors to be considered may include the increased risk
level due to operating conditions specific to an individual railroad.
In other words, factors presenting a greater than usual risk or hazard
would weigh in favor of determining that a railroad has an inadequate
safety record. Such factors might include the following:
     Share of a railroad's revenue from the shipment of
hazardous materials;
     Share of a railroad's revenue from the shipment of
hazardous materials in a major metropolitan area;
     Whether the railroad shares trackage rights with a
railroad engaged in passenger operations; and
     Whether a passenger operation crosses the railroad's
right-of-way at grade, otherwise known as a diamond crossing.
    As this document is an ANPRM, the above ideas are not intended to
constitute FRA's final position regarding the definition of
``inadequate safety record.'' Rather, they are intended to elicit
discussion and comment from interested parties. FRA anticipates that
any approach proposed in a future NPRM could differ significantly from
the above. Nevertheless, FRA believes that the approach presented above
provides a good starting point for discussion. As discussed further
below in the Request for Information section, FRA is interested in
receiving any comments, questions, or concerns about the above
approach, as well as any suggestions for alternate methods of
determining when a railroad has an ``inadequate safety record.''

B. RRP Requirements and Implementation

    As discussed above, the RSIA requires a railroad's RRP to include
certain minimum core components: A risk-based hazard analysis and an
RRPP (which must include a TIP and an FMP). FRA anticipates that a risk
reduction proposed rule would provide further specification regarding
what a risk-based hazard analysis and an RRPP might contain. For
example, FRA could propose the following requirements for public
comment:
     A railroad's risk-based hazard analysis may be required
to:
    [cir] Utilize certain demonstrated methodologies;
    [cir] Be of a certain scope;
    [cir] Contain a comprehensive description of the railroad's system;
    [cir] Address the risks posed both by and to contractors who work
for the railroad; and
    [cir] Address the risks posed by joint operations between
railroads.
     A railroad may be required to update its risk-based hazard
analysis on a periodic basis. Additionally, certain events or
occurrences may trigger a mandatory update of a railroad's risk-based
hazard analysis.
     A railroad's RRPP may be required to include defined roles
and responsibilities for contractors working for the railroad, as well
as employees.
     A railroad's RRPP may be required to provide for periodic
risk reduction training to specific railroad employees and contractors.
     A railroad's RRPP may be required to specify how the
railroad will periodically review the design and implementation of its
RRP utilizing valid mathematical tests or methods that conform to the
standards of the American Evaluation Association.
     A railroad may be required to maintain certain risk
reduction documentation and records and to make that information
available upon request to the FRA for auditing purposes.
     A railroad may be required to develop and submit a risk-
based hazard analysis and an RRPP for approval six months after the
publication of the final rule, and to fully implement the RRP six
months after the hazard analysis and the RRPP have been approved by the
FRA.

C. Request for Information

    In general, FRA seeks comments on the broad areas outlined within
this ANRPM, and approaches FRA can take to integrate existing FRA
requirements into a comprehensive risk reduction program that meets the
requirements set forth in RSIA. FRA seeks comments on how a risk
reduction program could be implemented to meet the requirements of the
law in a manner that maximizes benefits without imposing excessive,
unjustified, or unnecessary costs.
    FRA also seeks input from the public on the following specific
questions. Comments will be used by FRA to make decisions regarding the
content and direction of any future public meetings on the risk
reduction rulemaking and the contents of the NPRM. Each commenting
party should refer to the number of the specific question(s) to which
it is responding. FRA also requests additional comments and information
not addressed by these questions that would promote an understanding of
the implications of imposing an RRP regulatory requirement. FRA does
not expect that every commenter will be able to answer every question.
Please respond to those questions you feel able to answer or that
address your particular issue. FRA encourages responses from all
interested entities, not only railroads. Each comment filed by a party,
other than railroads or their representatives, should explain its
interest in risk reduction and how its comments may assist in the
development of an RRP rulemaking.
Risk Reduction Program
    1. If you are not in the railroad industry, please tell us about
your organization and your interest in risk reduction.
    2. What should be the scope of applicability for the final risk
reduction rule? Should certain types of railroads (such as tourist
railroads) be exempted from the regulation?
    3. The RSIA requires a railroad with an ``inadequate safety
record'' to develop and implement an FRA-approved RRP. This ANPRM
proposes a list of factors that FRA could consider when determining
whether a railroad has an ``inadequate safety record.''
    a. Is FRA asking the right questions to determine the adequacy of a
safety record? Please comment on the various factors FRA has
identified. What other questions should FRA be asking?
    b. What additional factors not discussed above should FRA consider?
    4. An RRP must be designed to improve safety by reducing the number
and rates of accidents, incidents, injuries, and fatalities. An RRP
will accomplish this by using a safety improvement process that
identifies accident precursors and mitigates hazards on an ongoing
basis.
    a. What should an effective RRP include to accomplish this mandate?
    b. How should a railroad go about adequately demonstrating that its
RRP is effective for addressing safety concerns identified in the risk-
based hazard analysis?
    c. How can a railroad utilize risk reduction to improve its
corporate safety culture?
    5. Each railroad required to develop and implement an FRA-approved
RRP must include defined roles and responsibilities for contractors.
FRA

will likely hold a railroad responsible for ensuring that a contractor
fulfills these roles and responsibilities.
    a. What are the different ways an RRP can incorporate contractors
performing work for a railroad?
    b. How would you determine which contractors should be included in
a railroad's RRP? Should a railroad's RRP be required to incorporate
only contractors who perform safety-sensitive service for the railroad?
Who should be excluded? Explain.
    c. Should a railroad or FRA (or both) be responsible for ensuring
that contractors working for a railroad are fulfilling their RRP roles
and responsibilities?
    6. An RRP must take into account the risks and hazards associated
with joint operations between railroads.
    a. How should FRA define joint operations in the context of an RRP
regulation?
    b. What are the different ways an RRP can incorporate risks and
hazards associated with joint operations?
    7. Should all railroads be required to submit risk-based hazard
analyses and RRPPs of identical scope and depth that meet uniform
rigorous standards? If not, how can FRA craft a scalable regulation
that applies fairly to both large and small railroads? Are there ways
to make risk reduction programs scalable and flexible, dependent upon
the size and flexibility of the railroad?
    8. Risk reduction is an ongoing, dynamic approach to identifying
and mitigating risks. How can a railroad use an RRPP to promote safety
improvement and to maintain an acceptable level of safety?
    9. What risk reduction activities are already in place at
railroads, and, how could those activities be incorporated into a
future proposed rule?
    10. Are there ways to achieve greater benefits at a lower cost
through alternative methods of implementation?
Risk-Based Hazard Analysis
    11. The RSIA requires each railroad to develop and implement an RRP
that systematically ``evaluates railroad safety risks on its system.''
How can a risk-based hazard analysis accomplish this mandate?
    a. What methodologies should FRA require that a railroad use when
conducting its risk-based hazard analysis?
    b. What should be excluded from the scope of a risk-based hazard
analysis? What should be included in that scope?
    c. How should a risk-based hazard analysis determine what is and
what is not an acceptable level of risk?
    d. What are various methods for determining whether a railroad has
effectively applied a risk-based hazard analysis to its entire system?
    12. FRA will likely require a risk-based hazard analysis to address
the risks presented both by and to contractors working for the
railroad. What elements would need to be present to ensure risks
relevant to contractors are addressed?
    a. Is there a particular set of contractors that FRA should focus
on, or, conversely, contractors that have little impact on overall
risk?
    13. When approving a railroad's RRPP, FRA will likely consider the
railroad's approach to updating its risk-based hazard analysis.
    a. At a minimum, how often should a railroad update a risk-based
hazard analysis? Why have you recommended this time span?
    b. In what ways is a risk-based hazard analysis an on-going process
supporting safety improvements?
    c. What type of events or occurrences might trigger an update of a
railroad's risk-based hazard analysis?
Risk Reduction Program Plan
    14. The RSIA requires a railroad to include a TIP and an FMP in its
RRPP. FRA may require an RRPP to have additional elements, such as a
comprehensive description of the railroad's system. What other basic
elements should an RRPP be required to contain?
    15. Based on the information provided in this ANPRM, what would the
potential burden on railroads be for developing and maintaining an
RRPP, TIP, and FMP? Are particular elements more burdensome than
others? Are there ways for FRA to reduce the burden on railroads
(including, but not limited to, reduction of burden on small entities)?
    16. All conclusions reached or positions taken by a railroad should
have supporting data that a reviewer can understand and follow in order
to reach the same conclusions. What additional supporting
documentation, data, or other information should a railroad be required
to include in the RRPP package it submits for FRA approval?
    17. Are there risk management standards or guidelines that FRA
should apply when approving a railroad's RRPP?
    18. Are there standards, analyses, or other considerations that FRA
should apply when deciding whether a railroad with an inadequate safety
record must submit a TIP providing for the implementation of a PTC
system?
    19. The RSIA requires a railroad to consider whether its FMP should
address certain elements. Are there additional elements that FRA should
require a railroad's FMP to consider? What are the likely costs of
implementing specific elements of an FMP, and, what are the expected
benefits of implementing these elements?
Training
    20. A railroad will likely be required to develop a risk reduction
training program (submitted as part of the railroad's RRPP) that
introduces the concept of safety risk reduction and the elements of the
railroad's RRP. What specific material should be included in or
excluded from a railroad's training?
    21. Which employees or classes of employees should a railroad be
required to train on various RRP policies and procedures? Who should be
excluded from this training? Explain.
    22. How often should risk reduction training be required? Why?
Recordkeeping and Program Audits
    23. FRA may require railroads to maintain RRP records related to
input and output data, safety outcomes, evaluation protocols, manuals,
training programs, policies, procedures, standard operating procedures,
etc. Would retaining these records be appropriate? Are there other
records FRA should propose that railroads maintain? What would be the
practical utility of collecting and maintaining this information? What
would the potential burden of these activities be? Are there ways for
FRA to reduce burden related to recordkeeping and auditing
requirements?
    24. In addition to a records review, FRA's annual review will
probably include field inspections, interviews, surveys, and other
evaluative data collection efforts. FRA may also inspect data
indicating whether the program has been effective in reducing risk. Are
these effective evaluation measures? What other tools could FRA
incorporate into its annual review effort?
    25. As provided by the RSIA, FRA will review a railroad's RRP
annually. Should FRA's annual review:
    a. Address a railroad's entire RRP?
    b. Focus primarily on certain RRP components, with a maximum of two
years between audits for any single program component?
    c. Target certain issues identified by accident/incident,
inspection, or complaint data?
    26. How should a railroad provide FRA access to proprietary or
sensitive data?
    27. FRA will likely require covered railroads to periodically
evaluate their RRP to ensure that it is effectively

reducing risk. Covered railroads will be specifically required to
evaluate components of the program that were not audited by FRA that
year. These evaluations will likely be required to utilize valid
mathematical tests or methods that conform to the standards of the
American Evaluation Association.
    a. How often should a railroad be required to evaluate the
effectiveness of its RRP?
    b. What other standards could a railroad use to evaluate the
effectiveness of its RRP?
    28. Should FRA allow a railroad to hire a contractor to evaluate
its RRP? If so, what qualifications or certifications should this
contractor have?
    29. What documentation/certification must a railroad maintain so
that FRA can verify that the railroad has properly evaluated the
effectiveness of its RRP?
Cost/Benefits
    30. What are the initial and recurrent costs of establishing and
maintaining RRP processes (e.g., internal auditing and evaluation, data
collection, employee training, computer software, personnel hiring and
training)?
    31. How could railroads maximize benefits associated with a risk
reduction program without unjustified or unnecessary costs?
    32. What new knowledge, skills, and abilities would your
organization need, if any, to operate successfully within a risk
reduction framework?
    33. What are practical ways a small business could apply the
elements of an RRP?
    34. What business benefits are created by a risk reduction program?
    35. Are there special costs or loss of benefits of scale for small
businesses? If so, how can they be minimized?
General/Background
    36. FRA may require a railroad to develop and submit an RRPP for
approval six months after publication of the final rule. Is this
timeline appropriate? If not, why? What additional problems does the
six month deadline create?
    37. FRA may require a railroad to establish a full initial
implementation of an RRP six months after the RRPP has been approved by
FRA.
    a. Is this timeline appropriate? If not, explain why it is not
appropriate.
    b. Should FRA permit a railroad to implement its RRP in phases?
What should those phases be? Explain.
    38. Has your organization implemented an official safety risk
reduction program (or other programs that could qualify as risk
reduction)? Please describe your implementation experience.
    a. How has this program impacted organizational safety and
compliance with existing Federal statutes and regulations?
    b. How have the resources required to implement and maintain the
program affected your organization?
    c. If you do not represent a railroad, how do you think your risk
reduction activities would apply in a railroad context?
    d. How has this program improved your organization's corporate
safety culture?
    39. Has your railroad undertaken a risk reduction pilot project? If
so, please tell us how successful that pilot project has been and how
any data or information obtained through the project could assist in
the development of an RRP regulation.
    40. What areas of FRA's current regulations do you believe already
incorporate risk reduction principles? How would you suggest the FRA
avoid any duplicative requirements in any risk reduction rulemaking
effort?
Public Meetings
    41. After the ANPRM comment period has closed, FRA may hold one or
more public hearings on the announced risk reduction rulemaking.
Decisions regarding public meetings will be made based upon the content
of the comments. As such, all interested entities should, to the best
of their ability, respond fully in writing to the questions presented
in this ANPRM.
    a. How many public meetings, if any, should FRA hold?
    b. Where should any public meeting(s) be held? Are there certain
meeting locations that would increase participation?

    Issued in Washington, DC, on December 2, 2010.
Karen J. Hedlund,
Chief Counsel, Federal Railroad Administration.
[FR Doc. 2010-30836 Filed 12-7-10; 8:45 am]
BILLING CODE 4910-06-P


[Federal Register Volume 78, Number 172 (Thursday, September 5, 2013)]
[Notices]
[Pages 54691-54694]
[FR Doc No: 2013-21562]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-30681; File No. 812-13973]

American General Life Insurance Company, et al.

August 29, 2013,
AGENCY: The Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under Section 6(c) of the
Investment Company Act of 1940, as amended (the ``Act'') granting
exemptions from the provisions of Sections 2(a)(32), 22(c) and
27(i)(2)(A) of the Act and Rule 22c-1 thereunder.

-----------------------------------------------------------------------

    Applicants: American General Life Insurance Company (``American
General''), The United States Life Insurance Company in the City of New
York (``US Life'') (each, an ``Insurance Company'' and together, the
``Insurance Companies''), SunAmerica Capital Services, Inc. (the
``Distributor''), Variable Separate Account (``VSA'') and FS Variable
Separate Account (``FS VSA'') (together, the ``Separate Accounts'').
The Insurance Companies, the Distributor, and the Separate Accounts are
collectively referred herein as the ``Applicants.''
    Summary of Application: The Applicants seek an order under Section
6(c) of the Act, exempting them from Sections 2(a)(32), 22(c), and
27(i)(2)(A)

of the Act and Rule 22c-1 thereunder, to permit the recapture, under
specified circumstances, of payment enhancements previously applied to
purchase payments under certain variable flexible premium deferred
annuity contracts issued by the Insurance Companies.
    Filing Date: The application was filed on November 14, 2011, and
amended and restated applications were filed on February 14, 2012,
February 16, 2012, June 13, 2012, and July 29, 2013.
    Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Secretary of
the Commission and serving Applicants with a copy of the request,
personally or by mail. Hearing requests should be received by the
Commission by 5:30 p.m. on September 23, 2013, and should be
accompanied by proof of service on the Applicants, in the form of an
affidavit or, for lawyers, a certificate of service. Hearing requests
should state the nature of the requestor's interest, the reason for the
request, and the issues contested. Persons who wish to be notified of a
hearing may request notification by writing to the Secretary of the
Commission.

ADDRESSES: Secretary, SEC, 100 F Street, NE., Washington, DC 20549-
1090. Applicants: American General Life Insurance Company and Variable
Separate Account, 1 SunAmerica Center, Los Angeles, CA 90067-6121; The
United States Life Insurance Company in the City of New York and FS
Variable Separate Account, One World Financial Center, 200 Liberty
Street, New York, NY 10281; SunAmerica Capital Services, Inc.,
Harborside Financial Center, 3200 Plaza 5, Jersey City, NJ 07311.

FOR FURTHER INFORMATION CONTACT: Jeffrey A. Foor, Senior Counsel or
Joyce M. Pickholz, Branch Chief, Insured Investments Office, Division
of Investment Management, at<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an Applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling<PHONE_NUMBER>.

Applicants' Representations

    1. In this application, Applicants seek the exemptions needed to
recapture payment enhancements offered under the Polaris Advantage II
variable annuity (the ``Contracts'') to be issued by each of American
General and US Life, in the circumstances set forth below. The
Contracts offer a payment enhancement or ``bonus'' and are registered
on Form N-4 in registration statements, file nos. 333-185780 and 333-
178848. Applicants also ask that the exemptions requested extend to
variable annuity contracts that are substantially similar in all
material respects to the Contracts (the ``Future Contracts'') issued
through the Separate Accounts or any other separate account of the
Insurance Companies established in the future (``Future Separate
Accounts'') to support Future Contracts. Applicants request that the
order sought herein extend to any future insurance company that will be
the successor in interest to American General or US Life as a result of
a reorganization into another jurisdiction or a change in the type of
business organization. Applicants also request that the order extend to
any FINRA member broker-dealer controlling, controlled by, or under
common control with Applicants, whether existing or created in the
future, that serves as a distributor or principal underwriter of the
Contracts offered through the Separate Accounts or any Future Separate
Account (``Broker-Dealers''). Applicants also request that the order
extend to broker-dealers that are FINRA-registered and not affiliated
with Applicants or the Broker-Dealers (the ``Unaffiliated Broker-
Dealers''). Each Unaffiliated Broker-Dealer will have entered into a
dealer agreement with the Distributor or an affiliate of the
Distributor prior to offering the Contracts.
    2. American General is a stock life insurance company organized
under the laws of the state of Texas. American General is an indirect,
wholly owned subsidiary of American International Group, Inc.
(``AIG''), a Delaware corporation. US Life is a stock life insurance
company organized under the laws of the state of New York. US Life is
an indirect, wholly owned subsidiary of AIG. The Distributor, an
affiliate of American General and US Life, is the distributor of the
contracts and is registered with the Commission as a broker-dealer
under the Securities Exchange Act of 1934, as amended (the ``1934
Act'') and is a member of Financial Industry Regulatory Authority
(``FINRA'').
    3. American General is the depositor and sponsor of Variable
Separate Account. US Life is the depositor and sponsor of FS Variable
Separate Account. American General and US Life may in the future issue
Future Contracts through the Separate Accounts, or through Future
Separate Accounts for which they would also serve as depositor.
    4. Variable Separate Account is a segregated asset account of
American General and FS Variable Separate Account is a segregated asset
account of US Life (File Nos. 811-03859 and 811-08810, respectively).
Each Separate Account is registered under the Act as a unit investment
trust and meets the definition of separate account set forth in Section
2(a)(37) of the Act. The same will be true of any Future Separate
Account.
    5. The Contracts are flexible premium deferred variable annuity
contracts. The minimum initial purchase payment for the Contracts is
$25,000, and any additional purchase payment must be at least $500
(except for owners who participate in certain periodic purchase payment
programs, in which case the minimum purchase payment must be at least
$100). The maximum issue age for the Contracts is 80, meaning that (i)
the owner must be 80 or younger or (ii) for Contracts that are not
owned by natural persons, the annuitant must be 80 or younger.
    6. The Contracts offer variable portfolios and fixed account(s). At
present, the Contracts offer portfolios of AIM Variable Insurance Funds
(Invesco Variable Insurance Funds), Anchor Series Trust, Franklin
Templeton Variable Insurance Products Trust, Lord Abbett Series Fund,
Inc., Seasons Series Trust and SunAmerica Series Trust. Under the
Contracts, Applicants reserve the right to offer new variable
portfolios or stop offering existing variable portfolios. New variable
portfolios may be made available to existing owners and variable
portfolios may be closed to new allocations or allocations of
additional purchase payments or transfers. In addition, Applicants may
also liquidate the shares of any variable portfolio, substitute the
shares of one underlying fund held by a variable portfolio for another
and/or merge variable portfolios or cooperate in a merger of underlying
funds (subject to Commission approval).
    7. An owner may elect one of two optional living benefits: the
SunAmerica Income Plus or the SunAmerica Income Builder. An owner will
receive the standard death benefit or may elect the optional Maximum
Anniversary Value death benefit for an additional fee. Applicants may
add other optional living and death benefits to the Contracts in the
future. The Contracts also offer optional features at no additional
cost such as automatic asset rebalancing, systematic withdrawals,
dollar cost averaging, nursing home

waiver, and spousal continuation with death benefit step-up. A
discussion of the features of the Contracts, including the optional
living benefits and death benefits, is included in the application.
    8. An owner can annuitize the Contracts using available fixed and/
or variable annuity income payment options. Those annuity payment
options include life income; life income with 10 or 20 year period
certain; or income for only a period certain (5-30 years); joint and
survivor life income; joint and survivor life income with 10 or 20 year
period certain. Generally, the latest annuitization date is the first
business day of the month following the annuitant's 95th birthday.
    9. The annualized Separate Account expense is 1.90% of the average
daily ending net asset value allocated to the variable portfolios for
contract years 1-9, reducing to 1.30% after the 9th contract
anniversary. There is a maintenance fee equal to $50 which is assessed
annually on the Contract's anniversary date, and is currently waived
for Contracts of $75,000 or more. There is no fee with respect to the
first 15 transfers in a contract year, but after the 15th such
transfer, a fee of $25 per transfer is currently imposed ($25 maximum).
    10. There is a contingent deferred sales charge (``Withdrawal
Charge'') under the Contracts, the amount of which is based on the
number of years that have elapsed since the receipt date of each
purchase payment. The Withdrawal Charge is equal to 9%, 9%, 8%, 8%, 7%,
6%, 5%, 4%, 3%, 0% beginning in year 1, and ending with no Withdrawal
Charge in year 10 and later for each purchase payment. No Withdrawal
Charge is imposed on the portion of a withdrawal that can be taken as
part of the free withdrawal feature of the Contracts. The maximum free
withdrawal amount available in each year is equal to the greater of 10%
of all purchase payments that are subject to a Withdrawal Charge and
not yet withdrawn or a maximum annual withdrawal amount available if a
living benefit feature has been elected. No Withdrawal Charge is
imposed in any situation in which Applicants intend to recapture a
payment enhancement.
    11. Under the Contracts, Applicants will credit a payment
enhancement for each purchase payment made to the Contracts during the
first two Contract years. Applicants calculate the payment enhancement
as a percentage of each purchase payment received, and credit it at the
time Applicants receive the purchase payment (hereinafter, a ``Payment
Enhancement''). The Payment Enhancement rate credited is the rate in
effect for the applicable enhancement level at the time Applicants
receive each purchase payment (hereinafter, ``Payment Enhancement
Rate''). The initial Payment Enhancement level is determined by the
amount of the initial purchase payment. The Payment Enhancement level
for subsequent purchase payments is determined by adding the amount of
the subsequent purchase payment to the contract value on the date
Applicants receive the purchase payment. If a higher Payment
Enhancement level is achieved by the sum of the contract value and the
subsequent purchase payment, the Payment Enhancement Rate for that
higher level is applicable to the entire subsequent purchase payment.
    12. The Payment Enhancement Rates credited are the same for all
owners; however, the Payment Enhancement levels may differ by broker-
dealer. For the currently offered Polaris Advantage II Contracts, the
Payment Enhancement Rate is 4% for a Payment Enhancement level of less
than $250,000 (or less than $100,000 for certain broker-dealers) and
the Payment Enhancement Rate is 6% for a Payment Enhancement level of
$250,000 and greater (or $100,000 or greater for certain broker-
dealers). The Payment Enhancement Rate currently being offered may be
increased or decreased by the Applicants at any time for prospectively
issued Contracts and Future Contracts. Currently, purchase payments are
credited with the Payment Enhancement Rate of up to 6.0%; however,
purchase payments may be credited with a Payment Enhancement Rate of up
to 7.5% for prospectively issued Contracts and Future Contracts.
    13. Each Insurance Company will fund Payment Enhancements from its
general account assets. Each Payment Enhancement will be allocated to
the variable portfolios and available fixed account(s) in the same
proportion that the corresponding purchase payment is allocated to such
options.
    14. Applicants seek to recapture the Payment Enhancements under the
following circumstances: (a) If the Contracts are returned during the
free look period, Applicants will deduct such Payment Enhancements from
the contract value; (b) if the owner's date of death is within 12
months of any Payment Enhancements being credited to the Contracts,
Applicants will deduct such Payment Enhancements credited within 12
months of the owner's death from the contract value or maximum
anniversary value, if applicable, when calculating the death benefit;
and/or (c) if the continuing spouse's date of death is within 12 months
of any Payment Enhancements being credited to the Contracts, Applicants
will deduct such Payment Enhancements credited within 12 months of the
continuing spouse's death from the contract value or maximum
anniversary value, if applicable, when calculating the death benefit
payable to the continuing spouse's beneficiary.
    15. The amount recaptured will equal the entire Payment Enhancement
amount without adjustment up or down for investment performance.
Therefore, the owner will receive any gain on the Payment Enhancement
amount that is recaptured and will bear any loss since the amount that
is recaptured will equal the amount of the Payment Enhancement.
Applicants will recapture the Payment Enhancements in the manner
contemplated by the application only with respect to Contracts issued
on or after the date that the Commission grants the order requested by
this application.

Applicants' Legal Analysis

    1. Section 6(c) of the Act authorizes the Commission to exempt any
person, security or transaction, or any class or classes of persons,
securities or transactions, from the provisions of the Act and the
rules promulgated thereunder if and to the extent that such exemption
is necessary or appropriate in the public interest and consistent with
the protection of investors and the purposes fairly intended by the
policy and provisions of the Act.
    2. Applicants request that the Commission, pursuant to Section 6(c)
of the Act, issue an order to the extent necessary to permit the
recapture of Payment Enhancements under the circumstances described
above. Applicants believe that the requested exemptions are
appropriate, in the public interest and consistent with the protection
of investors and the purposes fairly intended by the policy and
provisions of the Act.
    3. Applicants submit that the recapture of the Payment Enhancements
will not raise concerns under Sections 2(a)(32), 22(c) and 27(i)(2)(A)
of the Act, and Rule 22c-1 thereunder. Applicants represent that the
Payment Enhancements will be recaptured only under the circumstances
described above.
    4. Applicants state that the amounts recaptured equal the Payment
Enhancements provided by an Insurance Company from its own general
account assets. Applicants argue that when the Insurance Company
recaptures the Payment Enhancement, it is merely retrieving its own
assets, and the owner has not been deprived of a proportionate share of
the Separate

Accounts' assets, because his or her interest in the Payment
Enhancement amount has not vested. With respect to a Payment
Enhancement recaptured upon the exercise of the free look privilege of
the Contracts, Applicants submit it would be unfair to allow an owner
exercising that privilege to retain the Payment Enhancement under
Contracts that have been returned for a refund after a period of only a
few days. If the Applicants could not deduct the Payment Enhancement
from the amount returned to an individual during the free look period,
Applicants would bear the loss on the value of the Payment Enhancement
if the contract value dropped during the free look period. If the
Contracts are returned during the free look period, Applicants also
note that a Contract owner is entitled to retain any investment gain
attributable to the Payment Enhancement, even if the Payment
Enhancement is deducted. Furthermore, the recapture of the Payment
Enhancement if the owner's death occurs within 12 months after receipt
of a Payment Enhancement, is designed to provide the Insurance
Companies with a measure of protection against ``anti-selection.'' The
risk is that an owner, with full knowledge of impending death or
serious illness, will make very large payments to the Contracts which,
according to the Applicants, could result in significant financial
exposure to the Applicants.
    5. The recapture of a Payment Enhancement could be viewed as
involving the redemption of redeemable securities for a price other
than one based on the current net asset value of a Separate Account.
The recapture of the Payment Enhancement does not involve either of the
harms that Rule 22c-1 was intended to address, namely: (i) the dilution
of the value of outstanding redeemable securities of registered
investment companies through their sale at a price below net asset
value or redemption or repurchase at a price above it, and (ii) other
unfair results, including speculative trading practices.
    6. Applicants assert that the proposed recapture of the Payment
Enhancement does not pose a threat of dilution. To effect a recapture
of a Payment Enhancement, interests in an owner's contract will be
redeemed at a price determined on the basis of the current net asset
value. The amount recaptured will equal the amount of the Payment
Enhancement that the Insurance Company paid out of its general account
assets. Although the owner will be entitled to retain any investment
gain attributable to a Payment Enhancement, the amount of that gain
will be determined on the basis of current net asset value. Similarly,
the owner will bear any loss if investment performance declines since
the amount that is recaptured will equal the amount of the Payment
Enhancement. Therefore, no dilution will occur upon the recapture of a
Payment Enhancement.
    7. Applicants also submit that the second harm that Rule 22c-1 was
designed to address, namely speculative trading practices calculated to
take advantage of backward pricing, will not occur as a result of the
recapture of a Payment Enhancement because the pricing of the bonus
recapture will occur on the basis of the net asset value calculated in
accordance with Rule 22c-1 on the date of the recapture.
    8. Applicants submit that their request for an order that applies
to any Separate Account or any Future Separate Account established by
American General and US Life in connection with the issuance of
Contracts and Future Contracts, and underwritten or distributed by the
Distributor or other broker-dealers, is appropriate in the public
interest. Applicants request that the order sought herein extend to any
future insurance company that will be the successor in interest to
American General or US Life. Such an order would promote
competitiveness in the variable annuity market by eliminating the need
to file redundant exemptive applications, thereby reducing
administrative expenses and maximizing the efficient use of Applicants'
resources. Investors would not receive any benefit or additional
protection by requiring Applicants to repeatedly seek exemptive relief
that would present no issue under the Act that has not already been
addressed in this application. Having Applicants file additional
applications would impair Applicants' ability effectively to take
advantage of business opportunities as they arise.
    9. Applicants undertake that Future Contracts funded by Separate
Accounts or by Future Separate Accounts that seek to rely on the order
issue pursuant to the application will be substantially similar to the
Contracts in all material respects.

Conclusion

    For the reasons set forth in the application, the Applicants assert
that the requested order meets the standards set out in Section 6(c) of
the Act and that an order should, therefore, be granted.

    For the Commission, by the Division of Investment Management
under delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-21562 Filed 9-4-13; 8:45 am]
BILLING CODE 8011-01-P


identified as CBI only to the following address: U.S. Environmental
Protection Agency, Assessment and Standards Division, 2000 Traverwood
Drive, Ann Arbor, MI 48105, Attention Docket ID EPA-HQ-OAR-2018-0167.
You may claim information that you submit to EPA as CBI by marking any
part or all of that information as CBI (if you submit CBI on disk or CD
ROM, mark the outside of the disk or CD ROM as CBI and then identify
electronically within the disk or CD ROM the specific information that
is

CBI). Information so marked will not be disclosed except in accordance
with procedures set forth in 40 CFR part 2.
    In addition to one complete version of the comments that include
any information claimed as CBI, a copy of the comments that does not
contain the information claimed as CBI must be submitted for inclusion
in the public docket. This non-CBI version of your comments may be
submitted electronically, by mail, or through hand delivery/courier. If
you submit the copy that does not contain CBI on disk or CD ROM, mark
the outside of the disk or CD ROM clearly that it does not contain CBI.
Information not marked as CBI will be included in the public docket
without prior notice. If you have any questions about CBI or the
procedures for claiming CBI, please consult the person identified in
the FOR FURTHER INFORMATION CONTACT section.

IX. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review

    This action is an economically significant regulatory action that
was submitted to the Office of Management and Budget (OMB) for review.
Any changes made in response to OMB recommendations have been
documented in the docket. The EPA prepared an analysis of illustrative
costs associated with this action. This analysis is presented in
Section V of this preamble.

B. Executive Order 13771: Reducing Regulations and Controlling
Regulatory Costs

    This action is expected to be an Executive Order 13771 regulatory
action. Details on the estimated costs of this proposed rule can be
found in EPA's analysis of the illustrative costs associated with this
action. This analysis is presented in Section V of this preamble.

C. Paperwork Reduction Act (PRA)

    This action does not impose any new information collection burden
under the PRA. OMB has previously approved the information collection
activities contained in the existing regulations and has assigned OMB
control numbers 2060-0637 and 2060-0640. The proposed standards will
not impose new or different reporting requirements on regulated parties
than already exist for the RFS program.

D. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic
impact on a substantial number of small entities under the RFA. In
making this determination, the impact of concern is any significant
adverse economic impact on small entities. An agency may certify that a
rule will not have a significant economic impact on a substantial
number of small entities if the rule relieves regulatory burden, has no
net burden, or otherwise has a positive economic effect on the small
entities subject to the rule.
    The small entities directly regulated by the RFS program are small
refiners, which are defined at 13 CFR 121.201. We have evaluated the
impacts of this proposed rule on small entities from two perspectives:
As if the 2019 standards were a standalone action or if they are a part
of the overall impacts of the RFS program as a whole.
    When evaluating the standards as if they were a standalone action
separate and apart from the original rulemaking which established the
RFS2 program, then the standards could be viewed as increasing the
cellulosic biofuel volume by 93 million gallons and the advanced and
total renewable fuel volumes required of obligated parties by 590
million gallons between 2018 and 2019. To evaluate the impacts of the
volume requirements on small entities relative to 2018, EPA has
conducted a screening analysis \145\ to assess whether it should make a
finding that this action would not have a significant economic impact
on a substantial number of small entities. Currently available
information shows that the impact on small entities from implementation
of this rule would not be significant. EPA has reviewed and assessed
the available information, which shows that obligated parties,
including small entities, are generally able to recover the cost of
acquiring the RINs necessary for compliance with the RFS standards
through higher sales prices of the petroleum products they sell than
would be expected in the absence of the RFS program.\146\ This is true
whether they acquire RINs by purchasing renewable fuels with attached
RINs or purchase separated RINs. The costs of the RFS program are thus
generally being passed on to consumers in the highly competitive
marketplace. Even if we were to assume that the cost of acquiring RINs
were not recovered by obligated parties, and we used the maximum values
of the illustrative costs discussed in Section V of this preamble and
the gasoline and diesel fuel volume projections and wholesale prices
from the April 2018 version of EIA's Short-Term Energy Outlook, and
current wholesale fuel prices, a cost-to-sales ratio test shows that
the costs to small entities of the RFS standards are far less than 1
percent of the value of their sales.
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    \145\ ``Screening Analysis for the Proposed Renewable Fuel
Standards for 2019,'' memorandum from Dallas Burkholder, Nick
Parsons, and Tia Sutton to EPA Air Docket EPA-HQ-OAR-2018-0167.
    \146\ For a further discussion of the ability of obligated
parties to recover the cost of RINs see ``Denial of Petitions for
Rulemaking to Change the RFS Point of Obligation,'' EPA-420-R-17-
008, November 2017.
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    While the screening analysis described above supports a
certification that this rule would not have a significant economic
impact on small refiners, we continue to believe that it is more
appropriate to consider the standards as a part of ongoing
implementation of the overall RFS program. When considered this way,
the impacts of the RFS program as a whole on small entities were
addressed in the RFS2 final rule (75 FR 14670, March 26, 2010), which
was the rule that implemented the entire program as required by EISA
2007. As such, the Small Business Regulatory Enforcement Fairness Act
(SBREFA) panel process that took place prior to the 2010 rule was also
for the entire RFS program and looked at impacts on small refiners
through 2022.
    For the SBREFA process for the RFS2 final rule, EPA conducted
outreach, fact-finding, and analysis of the potential impacts of the
program on small refiners, which are all described in the Final
Regulatory Flexibility Analysis, located in the rulemaking docket (EPA-
HQ-OAR-2005-0161). This analysis looked at impacts to all refiners,
including small refiners, through the year 2022 and found that the
program would not have a significant economic impact on a substantial
number of small entities, and that this impact was expected to decrease
over time, even as the standards increased. For gasoline and/or diesel
small refiners subject to the standards, the analysis included a cost-
to-sales ratio test, a ratio of the estimated annualized compliance
costs to the value of sales per company. From this test, it was
estimated that all directly regulated small entities would have
compliance costs that are less than one percent of their sales over the
life of the program (75 FR 14862, March 26, 2010).
    We have determined that this proposed rule would not impose any
additional requirements on small entities beyond those already
analyzed, since the impacts of this rule are not

greater or fundamentally different than those already considered in the
analysis for the RFS2 final rule assuming full implementation of the
RFS program. This rule proposes to increase the 2019 cellulosic biofuel
volume requirement by 93 million gallons and the advanced and total
renewable fuel volume requirements by 590 million gallons relative to
the 2018 volume requirements, but those volumes remain significantly
below the statutory volume targets analyzed in the RFS2 final rule.
This exercise of EPA's waiver authority reduces burdens on small
entities, as compared to the burdens that would be imposed under the
volumes specified in the Clean Air Act in the absence of waivers--which
are the volumes that we assessed in the screening analysis that we
prepared for implementation of the full program. Regarding the BBD
standard, we are proposing to increase the volume requirement for 2020
by 330 million gallons relative to the 2019 volume requirement we
finalized in the 2018 final rule. While this volume is an increase over
the statutory minimum value of 1 billion gallons, the BBD standard is a
nested standard within the advanced biofuel category, which we are
significantly reducing from the statutory volume targets. As discussed
in Section VI, we are proposing to set the 2020 BBD volume requirement
at a level below what is anticipated will be produced and used to
satisfy the reduced advanced biofuel requirement. The net result of the
standards being proposed in this action is a reduction in burden as
compared to implementation of the statutory volume targets as was
assumed in the RFS2 final rule analysis.
    While the rule will not have a significant economic impact on a
substantial number of small entities, there are compliance
flexibilities in the program that can help to reduce impacts on small
entities. These flexibilities include being able to comply through RIN
trading rather than renewable fuel blending, 20 percent RIN rollover
allowance (up to 20 percent of an obligated party's RVO can be met
using previous-year RINs), and deficit carry-forward (the ability to
carry over a deficit from a given year into the following year,
providing that the deficit is satisfied together with the next year's
RVO). In the RFS2 final rule, we discussed other potential small entity
flexibilities that had been suggested by the SBREFA panel or through
comments, but we did not adopt them, in part because we had serious
concerns regarding our authority to do so.
    Additionally, we realize that there may be cases in which a small
entity may be in a difficult financial situation and the level of
assistance afforded by the program flexibilities is insufficient. For
such circumstances, the program provides hardship relief provisions for
small entities (small refiners), as well as for small refineries.\147\
As required by the statute, the RFS regulations include a hardship
relief provision (at 40 CFR 80.1441(e)(2)) that allows for a small
refinery to petition for an extension of its small refinery exemption
at any time based on a showing that the refinery is experiencing a
``disproportionate economic hardship.'' EPA regulations provide similar
relief to small refiners that are not eligible for small refinery
relief (see 40 CFR 80.1442(h)). EPA has currently identified a total of
10 small refiners that own 12 refineries subject to the RFS program,
all of which have been identified as being small refineries.
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    \147\ See CAA section 211(o)(9)(B).
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    EPA evaluates these petitions on a case-by-case basis and may
approve such petitions if it finds that a disproportionate economic
hardship exists. In evaluating such petitions, EPA consults with the
U.S. Department of Energy, and takes the findings of DOE's 2011 Small
Refinery Study and other economic factors into consideration. EPA
successfully implemented these provisions by evaluating petitions for
exemption from 20 small refineries for the 2016 RFS standards (3 of
which were owned by a small refiner) and 29 small refineries for the
2017 RFS standards (8 of which were owned by a small refiner).\148\
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    \148\ EPA is currently evaluating 4 additional 2017 petitions,
bringing the total number of petitions for 2017 to 33.
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    Given that this proposed rule would not impose additional
requirements on small entities, would decrease burden via a reduction
in required volumes as compared to statutory volume targets, would not
change the compliance flexibilities currently offered to small entities
under the RFS program (including the small refinery hardship provisions
we continue to implement), and available information shows that the
impact on small entities from implementation of this rule would not be
significant viewed either from the perspective of it being a standalone
action or a part of the overall RFS program, we have therefore
concluded that this action would have no net regulatory burden for
directly regulated small entities.

E. Unfunded Mandates Reform Act (UMRA)

    This action does not contain an unfunded mandate of $100 million or
more as described in UMRA, 2 U.S.C. 1531-1538, and does not
significantly or uniquely affect small governments. This action
implements mandates specifically and explicitly set forth in CAA
section 211(o) and we believe that this action represents the least
costly, most cost-effective approach to achieve the statutory
requirements.

F. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not 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.

G. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments

    This action does not have tribal implications as specified in
Executive Order 13175. This proposed rule will be implemented at the
Federal level and affects transportation fuel refiners, blenders,
marketers, distributors, importers, exporters, and renewable fuel
producers and importers. Tribal governments would be affected only to
the extent they produce, purchase, and use regulated fuels. Thus,
Executive Order 13175 does not apply to this action.

H. Executive Order 13045: Protection of Children From Environmental
Health Risks and Safety Risks

    The EPA interprets Executive Order 13045 as applying only to those
regulatory actions that concern environmental health or safety risks
that the EPA has reason to believe may disproportionately affect
children, per the definition of ``covered regulatory action'' in
section 2-202 of the Executive Order. This action is not subject to
Executive Order 13045 because it implements specific standards
established by Congress in statutes (CAA section 211(o)) and does not
concern an environmental health risk or safety risk.

I. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use

    This action is not a ``significant energy action'' because it is
not likely to have a significant adverse effect on the supply,
distribution, or use of energy. This action proposes the required
renewable fuel content of the transportation fuel supply for 2019,
consistent with the CAA and waiver authorities provided therein. The
RFS program and this rule are designed to

achieve positive effects on the nation's transportation fuel supply, by
increasing energy independence and security and lowering lifecycle GHG
emissions of transportation fuel.

J. National Technology Transfer and Advancement Act (NTTAA)

    This rulemaking does not involve technical standards.

K. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations

    The EPA believes that this action does not have disproportionately
high and adverse human health or environmental effects on minority
populations, low income populations, and/or indigenous peoples, as
specified in Executive Order 12898 (59 FR 7629, February 16, 1994).
This proposed rule does not affect the level of protection provided to
human health or the environment by applicable air quality standards.
This action does not relax the control measures on sources regulated by
the RFS regulations and therefore will not cause emissions increases
from these sources.

X. Statutory Authority

    Statutory authority for this action comes from section 211 of the
Clean Air Act, 42 U.S.C. 7545. Additional support for the procedural
and compliance related aspects of this proposed rule comes from
sections 114, 208, and 301(a) of the Clean Air Act, 42 U.S.C. 7414,
7542, and 7601(a).

List of Subjects in 40 CFR Part 80

    Environmental protection, Administrative practice and procedure,
Air pollution control, Diesel fuel, Fuel additives, Gasoline, Imports,
Oil imports, Petroleum, Renewable fuel.

    Dated: June 26, 2018.
E. Scott Pruitt,
Administrator.

    For the reasons set forth in the preamble, EPA proposes to amend 40
CFR part 80 as follows:

PART 80--REGULATION OF FUELS AND FUEL ADDITIVES

0
1. The authority citation for part 80 continues to read as follows:

    Authority:  42 U.S.C. 7414, 7521, 7542, 7545, and 7601(a).

Subpart M--Renewable Fuel Standard

0
2. Section 80.1405 is amended by adding new paragraph (a)(10) to read
as follows:

Sec.  80.1405  What are the Renewable Fuel Standards?

    (a) * * *
    (10) Renewable Fuel Standards for 2019.
    (i) The value of the cellulosic biofuel standard for 2019 shall be
0.209 percent.
    (ii) The value of the biomass-based diesel standard for 2019 shall
be 1.72 percent.
    (iii) The value of the advanced biofuel standard for 2019 shall be
2.67 percent.
    (iv) The value of the renewable fuel standard for 2019 shall be
10.88 percent.
* * * * *
[FR Doc. 2018-14448 Filed 7-9-18; 8:45 am]
 BILLING CODE 6560-50-P