November 14, 1996
Honorable Linda Hall Daschle
Acting Administrator
Federal Aviation Administration
Department of Transportation
400 Seventh Street, SW
Washington, DC 20590
Dear Ms. Daschle:
The Small Business Administration's Office of Advocacy is appreciates the opportunity to submit comments to the Federal Aviation Administration on the proposed rulemaking for special flight rules in the vicinity of the Grand Canyon National Park (GCNP).(1) Please assure these comments are placed on the public record.
The Office of Advocacy of the SBA was established by Congress under Public Law No. 94-305 to advocate the views of small business before Federal agencies and Congress. Advocacy is also required by §612 of the Regulatory Flexibility Act (RFA)(2) to monitor agency compliance with the RFA. As you may know, the Regulatory Flexibility Act was amended by the Small Business Regulatory Enforcement Fairness Act signed by President Clinton on March 29, 1996.(3) The amendments allow small entities to seek judicial review of agencies' compliance with the RFA. Many federal agencies have renewed their efforts to assure they are in compliance with the spirit and letter of the law which requires an analysis of the regulatory impact on small entities.
We have reviewed the agency's proposal and the accompanying initial regulatory flexibility analysis (IRFA) for this rulemaking. Our objective is to assure the agency has fully complied with RFA and minimized the cost to small entities. Our comments follow.
Objectives of the Regulation
It is difficult to determine what decibel level for what percentage of time in any given location of the park would satisfy the "natural quiet" objective of this regulation. We realize the agency and the National Park Service has struggled with a definition. It would promote public policy to attempt clarification of this issue in the context of this rulemaking, so that the regulated industries would be subjected to a more objective measure of "natural quiet."
Cost Estimates
The cost to the small business sector seems to be underestimated. The most significant initial cost will be the loss of revenue for tour operators. While FAA gave estimates in the general regulatory impact discussion, there was no estimates or discussion in the IRFA about revenue losses to small tour operators. Revenue loss seems to be drastically underestimated based on the industry's record from a similar FAA policy in Hawaii and from the implementation of SFAR 50-2 for the GCNP. The agency should spend some effort to assess the actual impact of those regulatory actions before moving forward with a more stringent policy.
The agency estimates that there will only be a 9.3 percent revenue reduction. This estimate is difficult to understand since the air space available to air tour flights will be reduced by 50 percent. The costs for curfews proposed include an assumption that there will be expanded tours in winter but that seems unreasonable. Many tours are made with on-the-spot reservations and cannot be postponed to winter. It is a frequent assumption of agencies that small businesses will recoup costs by increased prices but that depends on the elasticity of demand. For instance, tourist will choose other recreation options as prices rise. Because that assumption seems to be evident here, there are no revenue lost estimates included in the IRFA. The IRFA should include a discussion of demand elasticity, reductions in revenue as appropriate and the relationship of new cost levels to the revised revenue totals. Also, any available data on profit margins in this sector, which may be available from Dun and Bradstreet, should be obtained and taken into account. From our discussions with industry officials, we suspect profit margins in this sector do not exceed five percent. Yet this regulation at the minimum would affect about 10 percent of revenues according to FAA.
In addition, the agency should not dismiss an impact merely because it affects a small number of firms, particularly when it affects 100 percent of those serving a particular sector. "This proposed change, however, would only impact the five operators currently offering a two-way tour of the Zuni Point Corridor. . . . Thus, a substantial number of small operators would not be impacted."(4) Delineating the costs and thus, minimizing the overall impact does not promote the objectives of the Regulatory Flexibility Act.
If the cost estimates were credible in the FAA IRFA for the tour operation sector, we believe the industry would be not be so concerned about the impact of this regulation. However, there seems to be a speeding regulatory train that is heading for this tourist industry. We hope FAA will take a closer look at the comprehensive impact these regulatory actions are costing. Moreover, the agency has given no account for the cost to other small firms that probably benefit from these operations, including the travel agents that collect commission off booking these flights.
Alternatives
The alternatives(5) in the IRFA should specifically include options "which minimize any significant economic impact of the proposed rule on small entities." The alternatives offered in the IRFA do not fully address significant options for consideration. The caps and curfews offered seem to be more, not less, burdensome.
FAA should take this task very seriously. In fact, we suggest that the agency explore a much more aggressive approach to identifying these alternatives and seek public comment on them. There has been no alternative offered that would 1) establish different compliance and reporting requirements or timetables that take into account the resources available to small entities; 2) clarify, consolidate or simplify compliance and reporting requirements under the rule for small entities; 3) propose the use of performance rather than design standards; and 4) provide an exemption from coverage of the rule, or for some requirements, for small entities.
The FAA should strive for a thoughtful and balanced approach to public policy, taking into consideration the serious objections of the tour operators. Because there is no statutory deadline for completing this regulation, the agency has a good opportunity to craft that policy by reaching some middle ground among all the affected parties. Specifically, we recommend that the agency step-back and flush out more alternatives that include a standards advisory process of some type. We believe that Congress would be very satisfied to see the agency meet both the objectives of Public Law 100-91 and the Regulatory Flexibility Act.
The agency also should consider a performance-based system that would identify an agreed upon noise level. Monitoring could be gauged each year or some other time frame with acoustical equipment (rather than computer modeling) and requirements to trigger when sound levels are exceeded in various areas of the park. The threshold must be reasonable to sustain the peacefulness of the park while sustaining the community that is benefited by tour operators (e.g., tourists, third party industries, employees and the tour operations). With buy-in from the industry on a reasonable standard, the agency or the National Park Service may be able to assess a fee for monitoring purposes, rather than assess extensive paperwork requirements. This alternative on its face may be unpopular to the small businesses but if the agency is willing to work with the industry, there would more likely be a quid pro quo.
Paperwork
We were very astonished to see that the industry would be required to spend 61 hours per aircraft each year for paperwork. Requiring firms to report four times a year to the government seems excessive for an issue that is not endangering human life or significantly damaging natural resources. In a time of increased goals for government paperwork reduction under the Paperwork Reduction Act,(6) the agency needs to reassess this provision.
Conclusion
There seems to be a lot of questions remaining about how the industry would accommodate this new regulation. The questions include: Where would alternative flight patterns be allowed? What new safety precautions would be required? Ultimately, these issues would drive how much of the industry would reduce service to the GCNP, lose income and incur new costs.
Because the Regulatory Flexibility Act is an important part of the small business agenda and that of the Administration, the Office of Advocacy has gone to great lengths to meet with Federal agencies during the last six months by holding seminars for over 600 federal agency officials. Since no one from the FAA was able to attend, we hope that a meeting can be arranged in the very near future to discuss your agency's obligation under the RFA.
Please contact me if I can be of any assistance. As the Department proceeds with the rulemaking, Anita Drummond of my staff can be reached at (202) 205-6532 to work with your staff on compliance with the Regulatory Flexibility Act.
Sincerely, Jere W. Glover
Chief Counsel for Advocacy
cc: Honorable Sally Katzen
ENDNOTES
1. Federal Register Vol. 61, No. 148 at 40120
2. 5 U.S.C. §§601-612
3. P.L. 104-121
4. Federal Register, Vol. 61, No. 148 at 40133 (July 31, 1996)
5. USC 553
6. 44 USC 101 et seq.