Part 1.
RAILROAD COMMISSION OF TEXAS
Chapter 9.
LP-GAS SAFETY RULES
Subchapter A. GENERAL REQUIREMENTS
16 TAC §9.3, §9.26
The Railroad Commission of Texas adopts amendments to §9.3
and §9.26, relating to LP-Gas Report Forms, and Insurance Requirements,
without changes to the versions published in the October 25, 2002, issue of
the
Texas Register
(27 TexReg 9912). Specifically,
the Commission amends §9.3 to add two new forms: LPG Form 28, Notice
of Election to Self-Insure Per Rule 9.26, and LPG Form 28A, Bank Declarations
Regarding Irrevocable Letter of Credit, and amends §9.26 to change the
title of the rule and to add new subsection (j) which specifies requirements
for self-insurance for LP-gas licensees or applicants for license.
Texas Natural Resources Code, §113.097, states the Commission may
by rule allow a licensee to self-insure to meet the requirements of §113.097(d)
and (e) (relating to motor vehicle bodily injury and property damage liability
and general liability, respectively). The Commission does not adopt amendments
to allow self-insurance for worker's compensation, as permitted under Texas
Natural Resources Code, §113.097(f), because alternatives for that coverage
are more widely available.
Recently it has become more difficult for LP-gas companies doing business
in Texas to obtain insurance. Several insurance companies ceased offering
coverage in the Texas LP-gas market, and those insurance companies that continue
to write policies have significantly increased their rates. Some LP-gas licensees
have experienced rate increases exceeding 60% over their current premiums.
Historically, this business cycle has occurred every six to seven years, relative
to expansion and contraction in the financial markets. This year the financial
markets have been negatively affected from the events of 9-11 of last year.
Therefore the Commission has determined that it is in the public interest
to adopt rules governing self-insurance. Through the LPG Form 28, the Commission
will continue gathering information about insurance coverage for LP-gas activities,
such as which carriers are dropping coverage and what facts are causing licensees
to seek self-insurance, in order to evaluate the new self-insurance provisions
and adjust them as necessary.
Adopted new §9.26(j)(1) and (2) specify the requirements for a licensee
or applicant for license to self-insure for motor vehicle bodily injury and
property damage liability and general liability. A licensee or applicant wishing
to self-insure must file with the Commission LPG Form 28 and a properly completed
LPG Form 28A, to which should be attached any additional documentation necessary
to show that the bank issuing the irrevocable letter of credit meets the requirements
in subsection (j)(5)(E). Adopted new subsection (j)(3) states that the irrevocable
letter of credit must be in an amount that is no less than the total of the
minimum insurance coverage amounts required by the Commission (specified in
the Table in §9.26(a)) for each coverage for which the licensee or applicant
seeks to self-insure. Adopted new paragraph (4) states that the irrevocable
letter of credit must be valid until the expiration date shown on LPG Form
28, which may not be sooner than six months from the earlier of either the
expiration date of the license or the effective date of insurance coverage.
Adopted new paragraph (5) states the requirements for a letter of credit.
Adopted new paragraph (5)(A) through (D) state that the letter of credit must
be irrevocable during its term; must be payable to the Commission or the Commission's
designee in part or in full upon notice of loss claim; must include a guarantee
from the bank that issues the letter of credit; and may not apply to the licensing
requirements for worker's compensation insurance, including employers liability
insurance or alternative accident/health insurance.
Paragraph (5)(E) states the letter of credit must be issued by a federally
insured bank authorized to do business in the State of Texas. Bank management
is required to attest by sworn statement that the institution is not subject
to any outstanding written enforcement action, agreement, order, capital directive,
or prompt corrective action directive issued by a state or federal bank regulatory
agency; the institution must be well capitalized as defined in federal bank
regulatory statutes with a total risk-based capital ratio of 10% or greater,
a Tier 1 risk-based capital ratio of 6% or greater, and a leverage ratio of
5% or greater; the institution must have received a "satisfactory" or better
rating at its most recent Community Reinvestment Act examination by a federal
bank regulatory agency; bank management must attest that the full amount of
the letter of credit, when added to other indebtedness of the licensee or
applicant for license to the bank, is within the institution's regulatory
lending limit; and the issuing bank must be in good standing with the State
Comptroller's Office regarding payment of franchise taxes and other obligations
to the State.
Paragraph (6) sets forth the notice that a self-insured LP-gas licensee
must give in the event of an incident or accident involving LP-gas activities.
The Commission received five comments on the proposed amendments. The Texas
Propane Gas Association (TPGA) filed comments regarding three issues, but
did not expressly support or oppose the Commission's proposal. Kenneth R.
Smith, an individual, also filed comments regarding the same three issues
raised by TPGA. Mr. Smith did not expressly support or oppose the amendments.
TPGA and Mr. Smith expressed concern that if the proposed amendments did not
comply with regulations promulgated by the Department of Public Safety (DPS)
and the Texas Department of Transportation (TxDOT), then the amendments would
not benefit the LP-gas industry. TPGA and Mr. Smith inquired as to whether
TxDOT or DPS had been included in the development of the amendments. TPGA
and Mr. Smith also expressed the concern that the amendments cover the time
frame during which claims against licensees may be brought.
The Commission had concluded that the amendments do not conflict with any
regulations promulgated by TxDOT or DPS, but in any case separately notified
TxDOT and DPS of the proposed amendments and solicited their opinions on the
claimed conflict. TxDOT filed comments stating that TxDOT sees no conflict
between the proposed amendments to §9.26 and the TxDOT rules at 43 Texas
Administrative Code §§18.2 and 18.16. DPS filed comments indicating
that DPS sees no conflict between the proposed amendments to §9.26 and
DPS regulations, and that DPS finds no conflict exists for DPS officers enforcing
TxDOT regulations as a result of the amendments. The Commission has evaluated
the amendments to §9.26 for potential conflict and again finds that the
amendments do not conflict with Texas statutory law, Texas common law, or
regulations promulgated by other state agencies.
The Commission disagrees with TPGA's and Mr. Smith's comments that the
amendments need to address the time frame during which lawsuits may be brought
against licensees. A licensee is not prevented or prohibited by the amendments
from obtaining a letter of credit that includes coverage beyond expiration
of the licensee's self-insured period. The Commission intends the amendments
to operate as a short-term, stop-gap measure that will allow a licensee to
remain in operation should that licensee temporarily be unable to obtain insurance
coverage.
The LP-Gas Advisory Committee at its October 10, 2002, meeting commented
on the amendments and recommended that there be no 12- month limit on the
time period for a licensee to be self-insured. The advisory committee also
recommended that the Commission consider extending the time period for the
letter of credit to reflect the time during which a lawsuit may be brought
against a licensee. The advisory committee did not expressly support or oppose
the Commission's proposal. The Commission disagrees with the LP-Gas Advisory
Committee's recommendations. As stated in response to the TPGA comments, the
Commission intends the proposed amendments to operate as a short-term, stop-gap
measure designed to allow licensees to remain in operation should a licensee
temporarily be unable to obtain insurance coverage. The proposal is not intended
to and, in fact, cannot replace the insurance requirements in 16 TAC §9.19
of this title (relating to Insurance Requirements); rather the amendments
will enable a licensee to remain in operation while obtaining regular insurance
coverage. The amendments do not contain any limits on the expiration date
of the irrevocable letter of credit obtained by a licensee and therefore a
licensee is not prevented from obtaining a letter of credit that does not
expire prior to the period of time for which a claim may be brought against
the licensee for an accident or occurrence during the self-insured period.
The amendments are adopted under the Texas Natural Resources
Code, §113.051, which authorizes the Commission to adopt rules relating
to any and all aspects or phases of the LP-gas industry that will protect
or tend to protect the health, welfare, and safety of the general public,
and §113.097, which authorizes the Commission to adopt rules relating
to self-insurance for LP-gas licensees.
Texas Natural Resources Code, §113.051 and §113.097, are affected
by the adopted amendments.
Issued in Austin, Texas, on March 11, 2003.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on March 11, 2003.
TRD-200301681
Mary Ross McDonald
Deputy General Counsel
Railroad Commission of Texas
Effective date: March 31, 2003
Proposal publication date: October 25, 2002
For further information, please call: (512) 475-1295
Chapter 80.
LICENSED COURT INTERPRETERS
Part 4.
TEXAS DEPARTMENT OF LICENSING AND REGULATION