Regulations (Preambles to Final Rules) - Table of Contents Regulations (Preambles to Final Rules) - Table of Contents
• Record Type: Hazard Communication
• Section: 4
• Title: Section 4 - IV. Analyses of Regulatory Impact, Regulatory Flexibility, and Environmental Impact

IV. Analyses of Regulatory Impact, Regulatory Flexibility, and Environmental Impact

Executive Order 12866 (58 FR 51735, Sept. 30, 1993) requires that a regulatory impact analysis be conducted for any rule having major economic consequences on the national economy, individual industries, geographical regions, or levels of government. The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) similarly requires the Occupational Safety and Health Administration (OSHA) to consider the impact of a regulation on small entities.

The current final rule is merely a minor revision of the HCS which already applies to all industrial sectors where workers are exposed to hazardous chemicals. This revision is not a major or significant rule, thus no additional regulatory impact analysis is necessary. As noted in the NPRM (53 FR 29846-49), the analyses performed prior to publication of the 1987 final rule, which is currently being enforced, are not being revised. However, as comments were submitted concerning the costs of the current provisions, OSHA is taking this opportunity to briefly discuss some of the issues that have been raised.

As was the case with comments submitted subsequent to the publication of the 1987 final rule, most of these comments either provided no specific data or evidence regarding either the costs or the analysis, or rather simply provided cost summaries with no indication of methodology or substantiation of unit assumptions. Others provided cost estimates that were clearly unrealistic or based on false premises in terms of the actual requirements of the rule. OSHA maintains that the economic methodology used in the analysis was appropriate, and the costs were based on reasonable assumptions. Information submitted subsequent to that analysis have not persuaded OSHA that the cost analyses were unreasonable.

For example, as noted in the preamble to the NPRM, the Small Business Administration (SBA) and others criticized the estimates of products covered per firm. In particular, the use of the National Occupational Exposures Survey (NOES) data was considered by some to be inappropriate. Although OSHA has already shown that these criticisms were not valid (53 FR 29846-49), a few more points on the subject are in order.

As indicated previously, the data used from the NOES are averages. OSHA expected that some establishments in the nonmanufacturing industries will maintain more MSDSs than the average, just as some establishments will maintain fewer. Consequently, examples of firms with more than the average number of chemicals do not invalidate the survey (see Ex. 5-93). Furthermore, it should be noted that OSHA's estimates are for the number of hazardous chemical products at a facility or site, not for an inventory of all the chemicals a firm may have at multiple sites. The HCS also only requires that a firm maintain one MSDS for a particular chemical - where multiple suppliers are used, the chemical is only counted once.

The construction industry in particular claimed that the number of chemical products used in the estimates was too low. In general, estimates OSHA used varied by the size of the firm and the two-digit SIC code, but were approximately 12 products per firm per site (and an estimate of 3 ongoing sites for each firm at any given time). The Coalition (Ex. 11-142) submitted an actual count of products at a home building site per subcontractor. The average number per contractor per site was 8 (4 less than the OSHA average), although the number varied from 1 to 90. Only 5 of the 38 subcontractors had more than the average of 12 estimated by OSHA. The total number of MSDSs for this site was 302 (763 pages), which could easily fit in one file drawer on the site.

The Coalition still maintains OSHA's numbers are faulty, but could not explain why the data they submitted did not support their own contention in this regard (Tr. 5-56-7).

Similarly, AGC surveyed their members and received responses regarding number of MSDSs required (Ex. 11-135). The numbers varied from 10 to 525. However, it appears that these product counts are for the firm, and not for each job. And some of the commenters admitted that they send MSDSs to the site for chemicals that are not there so they do not have to sort the MSDSs in any fashion. In any event, even the largest reported number (525) for a firm (not a site) is substantially smaller than earlier claims of "thousands" (Ex. 5-76). Although 525 is a substantial number of MSDSs, they will fit in a space less than the size of a file drawer. This is also a quite smaller volume than claims that construction firms would need a separate office building to maintain MSDSs on a site (Ex. 5-76).

Actual community right-to-know reporting data from nonmanufacturing firms in Los Angeles also confirm that OSHA's estimates of products per firm are reasonable (Ex. 4-187).

The cost information submitted to the OSHA docket after the current rule was published does not provide sufficient evidence for OSHA to conclude that the Hazard Communication Standard that is currently being enforced is infeasible in any industry. (In fact, much of it does not include any information about how the costs were calculated.) As described in the NPRM, there have been claims from the construction industry that costs were underestimated by OSHA and the rule is therefore infeasible for this industry to comply with (see, e.g., Exs. 5-65, 5-83, and 5-86). Additional comments were received in response to the NPRM (see, e.g., 11-135, 11-142). However, many firms in the construction industry have been subject to state hazard communication laws for the last several years. Evidence on enforcement activities in several of those states indicate that construction firms are able to comply. The construction industry has also been subject for many years to the requirements of 29 CFR 1926.21, which establishes the obligation to train construction workers in the recognition and the safe handling of hazardous substances. In this regard the Hazard Communication Standard has added very few additional training responsibilities. OSHA's cost estimates focus only on new duties, not on the burdens of pre-existing standards. So the cost estimate for the expanded rule does not assume the costs for training that should have been conducted to comply with 1926.21. Employers who were not in compliance with that rule, or with the requirements of the states they are operating in, will have to spend more to comply than has been estimated. However, that is not a cost that is attributable to the HCS.

As the Agency has indicated before, the cost estimates were based on the best available information, and are averages. Firms will be expected to have costs both above and below the figures estimated. As long as estimates are based on reasonable assumptions and cost figures, the Agency has satisfied its analysis requirements to assure the rule is economically feasible. If OSHA were to rely on some or all of the assertions in the record regarding estimates of time involved in complying with the Standard, and estimates of the number of MSDSs which would be generated by the imposition of the Standard, the Standard would still be feasible in every SIC. Consequently, OSHA finds that claims of infeasible costs are not substantiated by any analysis or evidence, and that nothing in the record supports a conclusion of infeasibility in any SIC regulated under the existing rule.

Many of the claimed costs were also based on misinterpretations of the rule. As noted earlier in this preamble, for example, the Coalition cost estimates for a firm were based largely on accomplishment of activities that were not required to comply. Ex. 11-142. The results were therefore unrealistically inflated from what costs might actually be expected to occur.

OSHA expects that the limited modifications being promulgated in this final rule will not eliminate protections of the rule, but may make the standard more cost-effective. OSHA does not consider this NPRM to be either a major or significant rule. In addition, the changes are too subtle for the economic model to be able to reflect the decreases in the costs. However, it is expected that if the proposed changes are implemented the costs will be somewhat reduced.

With regard to criticisms of the cost methodology used by OSHA, the GAO has reviewed it at the request of Congress and concluded that OSHA's general approach to estimating the costs of compliance with the HCS requirements is fundamentally sound. It noted that the cost estimates derived would vary based on differences in assumptions regarding parameters. (GAO/HRD-92-63BR).

Regulatory Flexibility Analysis

Under the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., the Assistant Secretary certifies that modifications to the existing HCS contained in this final rule will not have a significant economic impact on a substantial number of small entities. This final rule has not substantively changed the HCS promulgated on August 24, 1987. The changes do not eliminate protections already provided by the rule, but simply clarify the rule to enhance compliance and thereby further improve employee protections. As noted in the discussion above regarding the regulatory impact analysis, the changes are too subtle to be quantified by the economic model used to calculate compliance costs of the HCS. It is expected, however, that if the proposed changes are implemented, the compliance costs would be somewhat reduced for small businesses.

A regulatory impact and regulatory flexibility analysis was prepared by OSHA for the August 1987 revised HCS (Exs. 4-1 and 4-2). See also 52 FR 31867-76 (summary of analyses). OSHA analyzed the impact of expanding the coverage of the HCS from the manufacturing sector to all employers within OSHA's jurisdiction. Economic impacts were analyzed for each provision of the rule; for each of fifty business classifications as indicated by their two-digit Standard Industrial Classification Codes; and for four employment size classes (1-19; 20-99; 100-249; and greater than 250). The majority of non-manufacturers are small businesses with fewer than 20 employees, and the effects of the HCS on small businesses were analyzed. Id. at 31869, 75-76 (tables 9 and 10). It should be noted, however, that although a particular workplace may be considered a small business based upon the number of employees at that site, many of these businesses are actually part of large corporations with significant safety and health resources (e.g., fast food franchises, retail store chains). OSHA's analyses indicated that the HCS's compliance costs would be a negligible percentage (less than one-half of one percent) of the typical small business' average annual revenue. Id. at 31869, 75 (table 9). In addition, no disproportionate impact was foreseen for small businesses when compared to large businesses. Id. at 31870, 75-76 (table 10).

OSHA believes that it has minimized the economic impact of the HCS on small entities in accordance with the Regulatory Flexibility Act, while accomplishing the objectives of the OSH Act. The HCS is a performance - oriented rule which benefits small employers by allowing them to choose compliance methods best suited for their individual workplaces. The HCS is also tailored for some work operations found in small businesses to ensure that the standard is practical and cost - effective in communicating hazards to workers. See, e.g., 29 CFR 1910.1200(b)(3), (laboratories); (b)(4), (handling of sealed containers); (b)(5), (container labeling exemptions); (b)(6), (products totally exempted). See also 52 FR 31858. In addition, OSHA - developed compliance guidelines, such as the new Appendix E to the rule, and the compliance kit available from GPO (OSHA 3104), will directly benefit small businesses by clarifying and simplifying compliance efforts.

Environmental Assessment - Finding of No Significant Impact

In accordance with the National Environmental Policy Act (42 U.S.C. 4321 et seq.), the Council on Environmental Quality guidelines (40 CFR part 1500), and the Department of Labor regulations (29 CFR part 11), the Assistant Secretary for OSHA has determined that this final rule will not have a significant environmental impact. As concluded previously, the current standard will not significantly affect the quality of the human environment outside the workplace. 52 FR 31870; 48 FR 53333-34. Labeling of containers will not have a direct or significant impact on air or water quality, land or energy use, or solid waste disposal outside of the workplace. Similarly, the requirements for preparation of a written compliance plan, provision and maintenance of MSDSs, and provision of information and training should not have an adverse environmental impact. Accordingly, this document's modifications to the HCS also will not have a significant impact on the environment outside the workplace.

[59 FR 6126, Feb. 9, 1994]

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