Federal Register, Volume 74, Number 76, April 22, 2009, Pages 18285-18448 Page: 18,324

Federal Register/Vol. 74, No. 76/Wednesday, April 22, 2009/Proposed Rules

would not have such an economic
effect.226
Although the scope of the Rule may
reach a substantial number of small
entities as defined in the RFA, the
Commission believes that the revised
proposed Rule would not have a
significant economic impact on those
businesses.227 In the initial NPRM, the
Commission specifically requested
comments on the economic impact of
the initial proposed Rule and received
none.228 Given that the revised
proposed Rule does not impose any
reporting or disclosure requirements,
document or data retention
requirements, or any other specific
conduct requirements, it is unlikely that
the revised proposed Rule will impose
costs to comply beyond the standard
costs associated with ensuring that acts,
practices, and courses of conduct are
not fraudulent or deceptive. Therefore,
the Commission believes that the
revised proposed Rule, if finalized,
would not have a significant economic
impact on a substantial number of small
entities. Notwithstanding this belief, the
Commission provides a full IRFA
analysis to aid in its solicitation for
additional comments on this topic.
1. Description of the reasons that action
by the agency is being considered
Section 811 grants the Commission
the authority to publish a rule that is
"necessary or appropriate in the public
interest or for the protection of United
States citizens."229 As discussed above,
the Commission believes that
promulgating the revised proposed Rule
is appropriate to prevent fraudulent or
deceptive conduct in connection with
wholesale petroleum markets for
commodities listed in Section 811, and
the Commission has tailored the revised
proposed Rule specifically to reach such
conduct.
2. Succinct statement of the objectives
of, and the legal basis for, the revised
proposed Rule
The legal basis of the revised
proposed Rule is Section 811 of EISA,
which prohibits fraudulent or deceptive
conduct in the wholesale purchase or
sale of petroleum products in
226 5 U.S.C. 605.
227 The RFA definition of "small entity" refers to
the definition provided in the Small Business Act,
which defines a "small-business concern" as a
business that is "independently owned and
operated and which is not dominant in its field of
operation." 15 U.S.C. 632(a)(1). As noted above,
Section 317.2(d) of the revised proposed Rule
defines a "person" as "any individual, group,
unincorporated association, limited or general
partnership, corporation, or other business entity."
228 See 73 FR at 48332.

contravention of rules, if any, that the
Commission may publish. The revised
proposed Rule is intended to define the
conduct that the law proscribes.
3. Description of and, where feasible, an
estimate of the number of small entities
to which the revised proposed Rule will
apply
The revised proposed Rule applies to
persons, including business entities,
engaging in the wholesale purchase or
sale of crude oil, gasoline, and
petroleum distillates. These potentially
include petroleum refiners, blenders,
wholesalers, and dealers (including
terminal operators that sell covered
commodities). Although many of these
entities are large international and
domestic corporations, the Commission
believes that a number of these covered
entities may fall into the category of
small entities.230 According to the Small
Business Administration ("SBA") size
standards, and utilizing SBA source
data, the Commission estimates that
between approximately 1,700 and 5,200
covered entities would be classified as
"small entities.'"231
230 Directly covered entities under this revised
proposed Rule are classified as small businesses
under the Small Business Size Standards
component of the North American Industry
Classification System ("NAICS") as follows:
petroleum refineries (NAICS code 324110) with no
more than 1,500 employees nor greater than
125,000 barrels per calendar day Operable
Atmospheric Crude Oil Distillation capacity;
petroleum bulk stations and terminals (NAICS code
424710) with no more than 100 employees; and
petroleum and petroleum products merchant
wholesalers (except bulk stations and terminals)
(NAICS code 424720) with no more than 100
employees. See SBA, Table of Small Business Size
Standards Matched to North American Industry
Classification System Codes (Aug. 22, 2008),
available at (http://www.sba.gov/idc/groups/public/
documents/sba_homepage/seresstd_tablepdf.pdf).
231 The SBA publication providing data on the
number of firms and number of employees by firm
does not provide sufficient precision to gauge the
number of small businesses that may be impacted
by the revised proposed Rule accurately. The data
is provided in increments of 0-4 employees, fewer
than 20 employees and fewer than 500 employees.
Small Business Administration, Employer Firms, &
Employment by Employment Size of Firm by
NAICS Codes, 2006, available at (http:/
www.sba.gov/advo/research/us06_n6.pdf). Thus for
the 228 petroleum refiners listed, 185 show that
they have less than 500 employees. Although the
Commission is unaware of more than five refiners
with less than 125,000 barrels of crude distillation
capacity, the data may be kept by refinery, rather
than refiner. Similar problems exist for the bulk
terminal and bulk wholesale categories listed above,
in which the relevant small business cut off is
greater than 100 employees. Although the
Commission sought additional comment on the
number of small entities covered by the initial
proposed Rule, it received none. Accordingly, the
small business data set forth in this IRFA are the
best estimates available to the Commission at this

time. Nonetheless, the Commission continues to
seek comment or information providing better data.

4. Description of projected reporting,
recordkeeping, and other compliance
requirements, including an estimate of
the classes of small entities that will be
subject to the requirement and the type
of professional skills necessary for
preparation of the report or record
The Commission does not propose,
and the revised proposed Rule does not
contain, any requirement that covered
entities create, retain, submit, or
disclose any information. Accordingly,
the revised proposed Rule would
impose no recordkeeping or related data
retention and maintenance or disclosure
requirements on any covered entity,
including small entities. Given that the
revised proposed Rule does not impose
any reporting requirements,232 it is
unlikely that the revised proposed Rule
would impose costs to comply beyond
standard costs (or skills) associated with
ensuring that conduct is not fraudulent
or deceptive.
5. Identification of other duplicative,
overlapping, or conflicting federal rules
As discussed previously, other federal
agencies have regulatory authority to
prohibit in whole or in part fraudulent
or deceptive conduct involving
petroleum products. The SEC has
authority to stop fraudulent and
deceptive conduct involving the
securities and securities offerings of
companies involved in the petroleum
industry. Additionally, the CFTC has
authority to bring an action against any
person who is manipulating or
attempting to manipulate energy
commodities.
As explained in Section IV.B. above,
the Commission does not intend for the
revised proposed Rule to impose
contradictory requirements on regulated
entities in the futures markets or
otherwise. To the extent, if any, that the
revised proposed Rule's requirements
could duplicate requirements already
established by other agencies for such
markets, the revised proposed Rule
should not impose any additional
compliance costs. The Commission is
requesting comment on the extent to
which other federal standards
concerning fraud and deception may
duplicate, satisfy, or inform the revised
proposed Rule's requirements. In
addition, the Commission seeks
comment and information about any
statutes or rules that may conflict with
the revised proposed Rule's
requirements, as well as any state, local,
or industry rules or policies that require
covered entities to implement practices

18324

229 42 U.S.C. 17301.

232 See 73 FR at 48332.