TITLE 16.ECONOMIC REGULATION

Part 1. RAILROAD COMMISSION OF TEXAS

Chapter 3. OIL AND GAS DIVISION

16 TAC §3.94

The Railroad Commission of Texas (Commission) proposes to amend §3.94, relating to Disposal of Oil and Gas NORM Waste. The Commission proposes the amendments to: (1) protect public health and safety and the environment by requiring that oilfield equipment in fields and facilities contaminated with NORM (naturally occurring radioactive material) be surveyed and tagged if it contains or is contaminated with NORM prior to the movement, transfer, or servicing of the equipment; (2) define permitted radiation levels consistent with standards for worker protection; and (3) update §3.94 to conform with requirements issued by the Texas Department of Health in 25 Tex. Admin. Code, Chapter 289, relating to Radiation Control.

Senate Bill 1338, 77th Legislature (2001), amended Texas Health and Safety Code, §401.415, by adding new subsections (a)(2)(A) and (a)(2)(B) specifically authorizing the Commission, in order to protect public health and safety and the environment, to require the owner or operator of oil and gas equipment used in exploration, production, or disposal to determine whether the equipment contains or is contaminated with oil and gas NORM waste, and to identify any equipment determined to contain or be contaminated with oil and gas NORM.

A person who owns or operates NORM contaminated oil and gas equipment must comply with specific requirements of Texas Department of Health regulations, including worker protection standards, when the equipment contains or is contaminated with NORM. The Commission adopted these worker protection standards by reference when the Commission first adopted §3.94. Under Texas Department of Health regulations a person is a general licensee when he or she possesses NORM. Further, each person subject to a general license is required to conduct operations in compliance with standards for protection of workers and the general population. In order to comply with the requirements of a general license, the person must know whether or not he or she possesses equipment contaminated with NORM above the exemption level of 50 microroentgen per hour (µR/hr). To make this determination, he or she must perform any surveys necessary under the circumstances to evaluate radiation levels.

In November 2000, the Commission delivered to the Governor a report entitled A Study of Regulation of Oil and Gas Naturally Occurring Radioactive Material (NORM) Waste In Texas (NORM Study). The NORM Study is on file in the Railroad Commission library in the William B. Travis Building, 12th floor, 1701 North Congress, Austin, Texas 78711. On page 12 of the study, the Commission noted that, of 612 sites surveyed, 57 sites had equipment with readings above the exemption level of 50 µR/hr, the limit above which specific Texas Department of Health regulations apply. Out of over 5900 readings, 203 were at or greater than this limit.

The Commission's website (www.rrc.state.tx.us) lists oilfields containing equipment that was found to be contaminated with NORM above the exemption level during the study. The Commission will update the list of contaminated fields as new information is collected on NORM contamination. The Commission strongly suggests that operators use this, and any other similar information, to help determine whether or not their equipment is likely to be contaminated with NORM above the regulatory exemption level of 50 µR/hr.

The Commission proposes to amend §3.94(a) to add definitions for equipment, radiation survey, and routine maintenance. "Equipment" is defined as oil and gas equipment used in exploration, production and disposal in order to be consistent with Senate Bill 1338. "Radiation survey" is defined in order to tell the operator how to comply with the intent of the statute. "Routine Maintenance" is defined to help operators discern which activities are routine maintenance and which activities constitute decontamination so that operators may have a clear understanding of when they are required to engage a person specifically licensed by the Department of Health to perform equipment decontamination.

The Commission proposes to remove from the rule the acronym TRCR (Texas Radiation Control Regulations) and references to that acronym in order to conform with the Texas Department of Health's recodification of its radiation regulations. Instead of referring to "TRCR," the proposed amendment cites specific Department of Health regulations in the Texas Administrative Code.

The Commission proposes to amend §3.94(b)(1) to include a requirement for identification of oil and gas equipment that contains or is contaminated with NORM above a specified radiation level.

The proposed addition of new §3.94(b)(2) represents the most important change to the existing rule. Proposed new §3.94(b)(2)(A) requires persons who own or operate oil and gas equipment in the fields shown in Table 1 or in any other field or facility contaminated with NORM to conduct a radiation survey of equipment in their control prior to routine maintenance of the equipment if, during that maintenance activity, workers could be exposed to NORM by a release from inside the equipment, transfer of equipment to another person, and/or removal of equipment from any lease, unit, or facility. Proposed new §3.94(b)(2)(B) specifies that equipment is contaminated by NORM when radiation levels exceed 50 µR/hr. Texas Department of Health regulations apply worker protection standards and limitations to equipment contaminated with radiation above 50 µR/hr. Proposed new §3.94(b)(2)(C) requires persons who own or operate oilfield equipment in fields and facilities where the maximum level of NORM is unknown or less than 50 µR/hr to conduct a radiation survey at least once every 2 years. Proposed new §3.94(b)(2)(D) requires operators in fields and facilities to identify NORM-contaminated equipment with tags or legible markings. Proposed new §3.94(b)(2)(E) requires that the surveys be performed in accordance with regulations adopted by Texas Department of Health in 25 Tex. Admin. Code §289.259(e), relating to Licensing of Naturally Occurring Radioactive Material (NORM).

The Commission proposes to amend §3.94(b)(3) by deleting language that indicates that the rule applies only to disposal of oil and gas NORM waste, consistent with the change in the statute as a result of SB 1338 which gives the Commission authority to require that oil and gas equipment be surveyed and subsequently identified if it contains or is contaminated with NORM. The remaining text in §3.94(b)(3) identifies activities that are under the jurisdiction of the Texas Department of Health.

The Commission proposes to amend §3.94(e)(1)(G)(iii) to require an operator to include on Form W-3A, Intent to Plug and Abandon, the radioactivity level of any NORM radionuclides to be disposed of in a well to be plugged, not just Radium 226 and 228 as the rule currently requires. The Commission proposes this amendment to conform with 25 Tex. Admin. Code §289.259 (d)(1)(A)(ii), relating to Licensing of Naturally Occurring Radioactive Material (NORM).

The Commission proposes to amend §3.94(e)(2)(A) to raise the radioactivity limit of oil and gas NORM waste that has been treated or processed for authorized on-site disposal by burial from less than five picocuries per gram (pCi/g)to less than 30 pCi/g Radium 226 and 228 or 150 pCi/g of any other radionuclide. Similarly, the Commission proposes to amend §3.94(e)(2)(B) to allow disposal of NORM waste on the same site where it was generated by mixing it with material on the land surface if the radioactivity concentration of the NORM and soil waste mixture does not exceed 30 pCi/g Radium 226 and 228 or 150 pCi/g of any other radionuclide. The new limits on radioactivity levels for burial and mixing material on the land surface are proposed to conform to 25 Tex. Admin. Code §289.259(d), which the Texas Department of Health amended to change the exemption levels for oil and gas NORM waste subsequent to the Commission's adoption of §3.94.

The Commission proposes to amend §3.94(f)(2)(C) to require that an application for a permit to dispose oil and gas NORM waste under §3.9 of this title, relating to disposal wells, include information on the maximum measured radioactivity level of oil and gas NORM waste to be injected in units of in pCi/g of NORM radionuclides other than Radium 226 and 228 to conform with 25 Tex. Admin Code §289.259(d)(1)(A)(ii), relating to Licensing of Naturally Occurring Radioactive Material (NORM). The rule currently requires information on the maximum measured radioactivity level in pCi/g of Radium 226 and 228 or µR/hr.

The Commission proposes to amend §3.94(g)(1) related to standards for issuance of a permit for surface disposal under §3.8, related to Water Protection, to increase the allowed radioactivity of an oil and gas NORM waste that is to be buried or mixed with the land surface from less than five pCi/g above the background level to less than 30 pCi/g of Radium 226 and 228 and less than 150 pCi/g for any other radionuclide. The Commission proposes to amend §3.94(g)(2)(C) to require that the applicant for a permit to dispose of oil and gas NORM waste by burial or by mixing with the land surface provide the maximum measured radioactivity level of any other NORM radionuclide. In addition, the proposed amendment to §3.94(g)(2)(D) requires that the applicant include the background radioactivity concentration measured in µR/hr as well as in pCi/g of Radium 226 and 228. The changes in these sections are necessary to conform with 25 Tex. Admin Code §289.259(d)(1)(A)(i) and (ii), relating to Licensing of Naturally Occurring Radioactive Material (NORM).

The Commission proposes to amend §3.94 (h), related to record keeping and reporting, to require operators to retain records relating to radiations surveys for at least 3 years and include a minimum of 2 consecutive radiation surveys. The operator shall report to the Commission equipment that is contaminated or contains NORM above the exemption level of 50 µR/hr. Proposed amendments to §3.94(h)(1)(E) would require the owner to maintain records on the radioactivity level of oil and gas NORM waste for any other NORM radionuclide, not just Radium 226 and 228, consistent with Texas Department of Health regulations.

Dr. Steven Seni, Assistant Director, Environmental Services, Oil and Gas Division, has determined that for each year of the first five years the section as amended will be in effect, there will be fiscal implications for state government as a result of enforcing or administering the rule. In order to verify operator compliance with the new rule, the Commission may need to purchase additional radiation-monitoring equipment in order to perform radiation surveys, and integrate the task of compliance monitoring to field staffs' ordinary inspection procedures. The Commission also anticipates it will develop a database and tracking system for NORM-contaminated equipment and fields and task data entry personnel in the Oil and Gas Division with maintaining the data base and tracking system. It is difficult to quantify the time demands of these additional tasks, but the Commission does not anticipate adding personnel for this purpose. If the Commission purchases radiation-monitoring equipment, the expenditure would be made in the first year; the purchase of a radiation detection instrument, such as a scintillation counter, would cost from approximately $200 to $2500. There would be no substantial fiscal impact from purchases in the second through the fifth years. There will be no fiscal impact on local governments.

David Cooney, Assistant Director, Office of General Counsel, has determined that for each year of the first five years the proposed amendments to §3.94 are in effect, the anticipated public benefit from adoption of the proposed amendments will be a more specific understanding of the nature and extent of NORM contamination in oil and gas equipment in Texas. Compliance with the rule will enhance prevention of pollution and protection of public health, particularly that of oil field and service company workers, from NORM-contaminated oil and gas equipment. The standards set forth in the proposed amendments to §3.94 provide operators with specific protocol for identifying and addressing potential NORM contamination, thereby preventing potential disposal problems. Compliance with the rule will reduce potential health risk to workers and the public throughout Texas.

The Commission has determined that there will be incremental costs of compliance for operators that are individuals, small businesses, or micro businesses. The Commission does not have the data to compare the cost of compliance for small businesses with the cost of compliance for the largest businesses affected by the proposed amendments to §3.94, using cost for each employee, cost for each hour of labor, or cost for each $100 of sales; however, the Commission has determined that most new expenses would be related to additional requirements for surveying and identifying oil and gas equipment for NORM contamination. Individual, small business, or micro business operators of oil and gas equipment will need to either hire radiation survey contractors or purchase radiation-monitoring equipment and design and implement a procedure for maintaining records of radiation surveys. If an operator elects to perform the survey of oil and gas equipment, the primary expense would be the cost to purchase a radiation detection instrument such as a scintillation counter. The Commission has determined that such devices can be purchased at a cost ranging from approximately $200 to $2500, and rented for approximately $12 per day. It is anticipated that a service company could perform the work at a cost of $20 per hour for a technician's time, plus machine rental plus a reasonable profit of 20%. Operators and service companies will have to decide whether to decontaminate or tag contaminated equipment. Service companies with the capacity to decontaminate and dispose of waste therefrom may realize a slight increase in business because the Commission anticipates decontamination will be the preferred alternative. In order to comply with current regulations for worker protection, operators already are required to perform any radiation surveys to evaluate potential radiation levels so they can determine whether or not they are a general licensee under Texas Department of Health Rules; therefore, the Commission expects the overall cost of compliance to be relatively low.

The Commission has determined that a local employment impact analysis pursuant to Texas Government Code, §2001.022, as amended by House Bill 1872, 77th Legislature (2001), is not necessary because the cost of compliance is not anticipated to be significant. The Commission cannot identify any specific geographic area of the state where continued and regular surveying and/or decontamination would be required at a level that would affect a local economy.

The Commission has not conducted a regulatory analysis of a major environmental rule under Texas Government Code, §2001.0225(b), for two reasons. First, the Commission finds that the proposed amendments are not "major environmental rules" as that term is defined in Texas Government Code, §2001.0225(g)(3); the Commission finds that the amendments do not adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. Second, the Commission proposes the amendments under the specific provisions enacted by Section 1, Senate Bill 1338, 77th Legislature (2001), rather than the general powers of the Commission. Therefore, according to Texas Government Code, §§2001.0225(a)(4), the proposed amendments are not subject to the requirements of the section.

The Commission has concurrently filed a notice of intent to review §3.94 as it is proposed to be amended, in accordance with Tex. Gov't Code §2001.039 ( as added by Acts 1999, 76th Leg., ch. 1499, §1.11(a) ).

Comments on the proposed amendments may be submitted to Dr. Steven Seni, Assistant Director of Environmental Services, Oil and Gas Division, Railroad Commission of Texas, P. O. Box 12967, Austin, Texas, 78711-2967, or by electronic mail to steven.seni@rrc.state.tx.us. Comments must be submitted by 5:00 p.m. on the 90th day after publication in the Texas Register . Dr Seni may also be contacted at (512) 463-3296 for more information.

The commission will hold a public hearing on this proposal at the following location and time: in Austin, Texas, on Tuesday, March 5, 2002, at 1:00 pm at the Railroad Commission of Texas, Room 1-100, William B. Travis Building, 1701 N. Congress. The hearing will be structured for the receipt of oral or written comments by interested persons. Registration will begin one hour prior to the hearing. Individuals may present oral statements when called upon in order of registration. There will be no open discussion during the hearing; however, commission staff members will be available to discuss the proposal one hour before the hearing.

This public comment hearing is open to anyone wishing to attend. Any individual with a disability who needs auxiliary aids and services in order to have an equal opportunity to effectively observe and/or participate in the meeting must request such aids or services by Wednesday, February 27, 2002, by notifying the Personnel Office of the Commission by mail at P. O. Box 12967, Austin, Texas 78711-2967 or by telephone at (512) 463- 6981 or TDD No. (512) 463-7284.

The Commission proposes the amendments under Texas Health and Safety Code, §401.415, which grants the Railroad Commission sole authority to regulate and issue licenses, permits, and orders for the disposal of oil and gas NORM, and authority to require the owner or operator of oil and gas equipment used in exploration, production, or disposal to determine whether the equipment contains or is contaminated with oil and gas NORM waste and to identify any equipment determined to contain or be contaminated with oil and gas NORM in order to protect public health and safety and the environment.

Texas Health and Safety Code, §401.415, is affected by these amendments.

Issued in Austin, Texas, on January 24, 2002.

§3.94.[ Disposal of ] Oil And Gas NORM [ Waste ].

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Background radiation--Radiation at the ground surface from:

(A) cosmic sources;

(B) non-technologically enhanced naturally occurring radioactive material, including radon, except as a decay product of source or special nuclear material; and

(C) global fallout as it exists in the environment from the testing of nuclear explosive devices. "Background radiation" does not include sources of radiation from radioactive materials regulated by the Texas Department of Health.

(2) Commission--The Railroad Commission of Texas.

(3) Disposal--The discharge, deposit, injection, dumping, spilling, leaking, or placing of any oil and gas NORM waste into or on any land or water so that such waste, or any constituent thereof, may enter the environment or be emitted into the air or discharged into any waters, including subsurface waters. For purposes of this section, disposal of oil and gas NORM waste includes its management at the site (e.g., lease, unit, or facility) where disposal will occur when undertaken for the explicit purpose of facilitating disposal at that site. The term does not include decontamination activities, except for in-place mixing of oil and gas NORM waste to remedy historical contamination of the land surface and decontamination of equipment and facilities that become contaminated solely through disposal operations. In addition, the term does not include activities, including processing or treatment, that occur at a location other than the disposal site.

(4) Equipment--Oil and gas equipment used for exploration, production, or disposal that is or has been in contact with produced fluids or waste, including, but not limited to, tubulars, tanks, vessels, pumps, valves, flow lines, and connectors such as tees and elbows.

(5) [ (4) ] Microroentgens per hour (µR/hr) [ (microroentgens/hr) ]--A measurement of exposure from x-ray and gamma ray radiation in air.

(6) [ (5) ] NORM--Naturally occurring radioactive material.

(7) [ (6) ] Oil and gas waste--Oil and gas waste as defined in §3.8 of this title (relating to Water Protection).

(8) [ (7) ] Oil and gas [ Gas ] NORM waste--Any solid, liquid, or gaseous material or combination of materials (excluding source material, special nuclear material, and by- product material) that:

(A) in its natural physical state spontaneously emits radiation;

(B) is discarded or unwanted;

(C) constitutes, is contained in, or has contaminated oil and gas waste; and

(D) prior to treatment or processing that reduces the radioactivity concentration, exceeds exemption criteria specified in 25 Tex. Admin. Code §289.259(d)(1)(2) and (3), relating to Licensing of Naturally Occurring Radioactive Material (NORM) [ the Texas Department of Health's Texas Radiation Control Regulations for of (TRCR) Part 46.4(a)(1) and (2) ].

(9) [ (8) ] Person--A natural person, corporation, organization, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, or any other legal entity.

(10) [ (9) ] Picocuries per gram (pCi/g)--A measure of the radioactivity in one gram of a material. One picocurie is that quantity of radionuclide(s) that decays at the rate of 3.7 x 10- ² disintegrations per second.

(11) Radiation Survey--A systematic examination of gamma radiation levels using instrumentation.

(12) Routine Maintenance--The repair and upkeep of equipment for the purposes of restoring its intended use or efficiency. Routine maintenance is performed on equipment that is currently in use and that is not intended for any use other than oil and gas operations.

[ (10) TRCR--Texas Regulations for the Control of Radiation, adopted by the Texas Department of Health at 25 Texas Administrative Code Chapter 289.]

(b) Purpose, identification, exclusions, and exemptions.

(1) Purpose. This section establishes requirements for the identification of oil and gas NORM in equipment and the disposal of [ radioactive constituents of ] oil and gas NORM waste for the purpose of protecting public health, safety, and the environment. The provisions of this section do not supersede other commission regulations relating to oil and gas waste management, including disposal.

(2) Oil and Gas Equipment Surveys and Identification.

(A) Persons who own or operate oil and gas equipment in the fields shown in Table 1 of this section or in any other field or facility contaminated with NORM shall conduct a radiation survey of equipment in their control or possession prior to:

Figure: 16 TAC §3.94(b)(2)(A)

(i) routine maintenance of equipment where workers could be exposed to NORM released from inside the equipment;

(ii) any transfer of equipment to another person;

(iii) the removal of equipment from any lease, unit, or facility.

(B) Equipment contains or is contaminated with NORM when the survey finds the radiation exposure level is greater than 50 µR/hr, including background radiation, at any accessible point.

(C) Persons who own or operate equipment in fields or facilities where the level of NORM is unknown or less than 50 µR/hr shall conduct a radiation survey at least once every 2 years.

(D) Equipment determined to contain or to be contaminated with NORM shall be identified with the letters NORM and the µR/hr reading prior to the activities described in subsection (b)(2)(A) of this section by attaching a clearly visible water-proof tag or marking with a legible water-proof paint or ink.

(E) Surveys required by this paragraph shall be performed pursuant to regulations adopted by the Texas Department of Health in 25 Texas Administrative Code §289.259(e), relating to Licensing of Naturally Occurring Radioactive Material (NORM).

(3) [ (2) ] Exclusions. [ This section does not apply to activities involving the recycling of oil and gas NORM waste. In addition, this section does not apply to the decontamination of equipment or facilities contaminated with oil and gas NORM waste, unless such equipment or facilities become contaminated with oil and gas NORM waste solely as a result of disposal activities. For purposes of this section, in-place mixing of oil and gas NORM waste to remedy historical contamination of the land surface is not considered decontamination of equipment or facilities and is regulated under this section. Further, this section does not apply to activities that involve the possession, use, transfer, transport, and/or storage of oil and gas NORM waste, other than such activities when they occur at the site (e.g., lease, unit, or facility) where disposal will occur and that are undertaken for the explicit purpose of facilitating disposal at that site. ] Activities involving the recycling of oil and gas NORM waste; the decontamination of equipment and facilities that are contaminated with oil and gas NORM waste as a result of activities other than disposal of oil and gas NORM waste; and the possession, use, transfer, transport, and/or storage of oil and gas NORM waste are under the jurisdiction of the Texas Department of Health.

(4) [ (3) ] Exemptions. Disposal of produced water by injection into a well permitted under §3.9 of this title (relating to Disposal Wells) or §3.46 of this title (relating to Fluid Injection into Productive Reservoirs) is exempt from the requirements of this section. Further, disposal of produced water by discharge to surface waters and in accordance with a discharge permit issued under §3.8 of this title (relating to Water Protection) is exempt from the requirements of this section. In addition, disposal of equipment that has been decontaminated in accordance with a license issued by the Texas Department of Health and that meets the exemption criteria of 25 Tex. Admin. Code §289.259(d), relating to Licensing of Naturally Occurring Radioactive Material (NORM), [ TRCR Part 46 ] is exempt from the requirements under this section.

(c) Worker protection standards.

(1) Requirements. Any employer of persons engaged in activities involving the disposal of oil and gas NORM waste shall:

(A) comply with the requirements of 25 Tex. Admin. Code §289.202(e), relating to Standards for Protection Against Radiation from Radioactive Material, adopted to be effective October 1, 2000 [ TRCR 21.101 (regarding radiation protection programs) ];

(B) control the occupational dose to his or her employees as provided in 25 Tex. Admin. Code §289.202(f)-(m), adopted to be effective October 1, 2000 [ TRCR §§21.201-21.208 ];

(C) comply with the requirements of 25 Tex. Admin. Code §289.202(p) and (q), adopted to be effective October 1, 2000 [ TRCR 21.501 and §21.502 (regarding surveys and monitoring) ];

(D) comply with the requirements of 25 Tex. Admin. Code §289.202(v)-(x), adopted to be effective October 1, 2000 [ TRCR 21.701-21.703 (regarding respiratory protection and controls to restrict internal exposure in restricted areas) ];

(E) comply with the requirements of 25 Tex. Admin. Code §289.202(z)-(dd), adopted to be effective October 1, 2000 [ TRCR §§21.901-21.906 (regarding posting requirements and exceptions to posting requirements) ];

(F) comply with the requirements of 25 Tex. Admin. Code§289.202(ll)-(nn), (pp)-(rr), and (vv), adopted to be effective October 1, 2000 [ TRCR 21.1101-21.1103, 21.1105- 21.1107, and 21.1111 (regarding records of radiation protection programs and records of special exposures) ]; and

(G) comply with the requirements of 25 Tex. Admin. Code §289.202(ww)-(zz) and (aaa), adopted to be effective October 1, 2000 [ TRCR 21.1201-21.1204 and 21.1207 (regarding reports) ].

(2) Adoption by reference. The Commission adopts by reference the rules of the Texas Department of Health identified in subsection (c)(1)(A)-(G) of this section. [ The TRCR sections referenced in this subsection are hereby adopted by reference. ] Words and terms used in the provisions [ TRCR sections ] adopted by reference shall have the meanings given in 25 Tex. Admin. Code §289.202 [ the TRCR sections adopted ], except that the terms "licensee" and "registrant" shall be interpreted to mean "employer of persons engaged in activities involving the disposal of oil and gas NORM waste" and the term "agency" shall be interpreted to mean "commission."

(d) Prohibited disposal. No person may dispose of oil and gas NORM waste except as provided in this section. Further, disposal of oil and gas NORM waste other than produced water by discharge to surface or subsurface waters, as defined in §3.8 of this title (relating to Water Protection), is expressly prohibited. Disposal of oil and gas NORM waste by spreading on public or private roads is also expressly prohibited.

(e) Authorized disposal methods. The methods for disposing of oil and gas NORM waste described in this subsection are authorized by this section. A permit is not required to dispose of oil and gas NORM waste by the methods identified in this subsection.

(1) Disposal in plugged and abandoned well. A person may dispose of oil and gas NORM waste by placing it between plugs in a well that is being plugged and abandoned, provided that the conditions of this paragraph are met.

(A) No person may dispose of oil and gas NORM waste at a lease or unit other than the lease or unit where the oil and gas NORM waste was generated unless the surface owner of the lease or unit where the disposal occurs provides written consent for the disposal. Such written consent shall be obtained prior to commencement of disposal operations.

(B) The oil and gas NORM waste shall be placed in the well at a depth at least 250 feet below the base of usable quality water as determined in accordance with §3.14 of this title (relating to Plugging).

(C) If the oil and gas NORM waste is encased in a tubing string, the tubing shall be:

(i) placed, not dropped, in the well; and

(ii) left with an assembly that allows ready retrieval, if the string is not secured in cement.

(D) A cement plug shall be set immediately above the oil and gas NORM waste and the plug shall be either:

(i) above a cement retainer;

(ii) above a cast iron bridge plug; or

(iii) tagged to locate its position.

(E) The cement of the surface plug shall be color dyed with red iron oxide.

(F) A permanent marker that shows the three-bladed radiation symbol specified in 25 Tex. Admin. Code §289.202(z), adopted to be effective October 1, 2000, [ TRCR §21.901, ] without regard to color, shall be welded to the steel plate at the top of the well casing.

(G) The operator shall state on Form W-3A, Intent to Plug and Abandon[ , shall indicate ]:

(i) the physical nature (i.e., pipe scale, contaminated soil, basic sediment, pumps, or valves) of the oil and gas NORM waste;

(ii) the volume of oil and gas NORM waste;

(iii) the radioactivity level of the oil and gas NORM waste (in pCi/g of Radium-226 and 228 and any other NORM radionuclides , or in µR/hr [ microroentgens/hr ]);

(iv) the operator(s) of the lease, unit, or facility at which oil and gas NORM waste was generated; and

(v) the source(s), if known, of the oil and gas NORM waste by commission district; field; lease, unit, or facility; and producing formation.

(H) If the oil and gas NORM waste is encased in tubing, the operator shall state on Form W-3A, Intent to Plug and Abandon[ , shall indicate ]:

(i) the size, grade, weight per foot, and outside diameter of the tubing;

(ii) the subsurface depth of both the top and bottom of the tubing;

(iii) the diameter of the retrieval assembly; and

(iv) whether the tubing is free in the hole or is secured by cement, a bridge plug, or a cement retainer.

(I) The operator shall submit the information required in subparagraphs (A), (B), (G), and (H) of this paragraph [ shall be submitted ] to the district office with the Form W-3A.

(2) On-site disposal.

(A) Except as otherwise provided in this subparagraph, a person may dispose of oil and gas NORM waste by burial at the same site where the oil and gas NORM waste was generated, provided that prior to burial the oil and gas NORM waste has been treated or processed such that the radioactivity concentration does not exceed 30 pCi/g Radium 226 and 228 or 150 pCi/g of any other NORM radionuclide [ of both Radium-226 and 228 ] within the treated or processed waste [ does not exceed the background radioactivity concentration by more than five pCi/g ]. Such treatment or processing, if it occurs at the disposal site, is considered to fall within the definition of disposal because it is necessary to facilitate disposal. This subparagraph does not authorize any person to dispose [ disposal ] of equipment contaminated with oil and gas NORM waste.

(B) A person may dispose of oil and gas NORM waste at the same site where the oil and gas NORM waste was generated by applying it to and mixing it with the land surface, provided that after such application and mixing the radioactivity concentration [ of Radium-226 and 228 ] in the area where the oil and gas NORM waste was applied and mixed does not exceed 30pCi/g Radium 226 and 228 or 150 pCi/g of any other radionuclide [ the background radioactivity concentration by more than five pCi/g ].

(3) Disposal at a licensed facility. A person may dispose of oil and gas NORM waste at a facility that has been licensed by the United States Nuclear Regulatory Commission, the State of Texas [ Natural Resource Conservation Commission ], or another state if such facility is authorized under its license to receive and dispose of such waste.

(4) Injection. Injection of oil and gas NORM waste that meets exemption criteria of 25 Tex. Admin. Code §289.259, relating to Licensing of Naturally Occurring Radioactive Material (NORM), [ TRCR Part 46 ] as a result of treatment or processing at a facility licensed by the Texas Department of Health (hereinafter referred to as a "specifically licensed facility") into a well permitted under §3.9 of this title (relating to Disposal Wells) is authorized under this section, provided that the requirements of this paragraph are met.

(A) Prior to injecting treated or processed oil and gas NORM waste, the operator of the injection well shall notify the commission in writing [ must be notified, in writing, by the operator of the injection well ] that the operator [ it ] plans to inject oil and gas NORM waste that meets exemption criteria of 25 Tex. Admin. Code §289.259 [ TRCR Part 46 ] as a result of treatment or processing at a specifically licensed facility. The operator [ Such notification ] shall include a copy of the Texas Health Department license for each facility where oil and gas NORM waste that will be injected is treated or processed in order to meet exemption criteria of 25 Tex. Admin. Code §289.259 [ TRCR Part 46 ].

(B) Prior to injecting oil and gas NORM waste that has been treated or processed to meet exemption criteria of 25 Tex. Admin. Code §289.259, [ TRCR Part 46, ] the injection well operator shall [ must ] verify that the waste meets the exemption criteria of 25 Tex. Admin. Code §289.259 [ TRCR Part 46 ] by obtaining from the specifically licensed facility documentation regarding NORM surveys or other analyses conducted to ensure that the treated or processed oil and gas NORM waste meets the exemption criteria of 25 Tex. Admin. Code §289.259 [ TRCR Part 46 ].

(f) Permit required for injection. With the exceptions of produced water and oil and gas NORM waste that meets exemption criteria of 25 Tex. Admin. Code §289.259 [ TRCR Part 46 ] as a result of treatment or processing at a facility licensed by the Texas Department of Health, no person may dispose of oil and gas NORM waste by injection into a well without a permit issued under §3.9 of this title (relating to Disposal Wells) that specifically allows disposal of oil and gas NORM waste. The provisions of this subsection apply in the case of oil and gas NORM waste disposal permits issued under §3.9 of this title (relating to Disposal Wells).

(1) Standards for permit issuance. The Commission shall issue a [ A ] permit to dispose of oil and gas NORM waste under §3.9 of this title (relating to Disposal Wells) [ may be issued ] only if the commission, or its designee, determines that the subject oil and gas NORM waste will be disposed of in a manner that protects public health, safety, and the environment. Any permit to dispose of oil and gas NORM waste issued pursuant to §3.9 of this title (relating to Disposal Wells) shall contain construction and operating requirements that are reasonably necessary to protect public health, safety, and the environment.

(2) NORM information. In addition to the application requirements of §3.9 of this title (relating to Disposal Wells), an applicant for a permit to inject [ an application for injection of ] oil and gas NORM waste shall include the information specified in this paragraph. The commission or its designee may require the applicant to provide any such additional information as may be necessary to show that the proposed disposal protects [ is protective of ] public health, safety, and the environment.

(A) The applicant [ application ] shall describe the physical nature (i.e., pipe scale, contaminated soil, or basic sediment[ , pumps, or valves ]) of the oil and gas NORM waste to be disposed of.

(B) The applicant [ application ] shall state the total volume of oil and gas NORM waste to be disposed of or the proposed rate of oil and gas NORM waste disposal.

(C) The applicant [ application ] shall state the maximum measured radioactivity level of the oil and gas NORM waste (in pCi/g of Radium-226 and 228, and any other NORM radionuclide [ or in microroentgens/hr ]) that will be disposed of.

(3) Notice requirements. An applicant for a permit to inject oil and gas NORM waste under §3.9 of this title (relating to Disposal Wells) shall provide notice as required in §3.9 of this title (relating to Disposal Wells) and shall include in such notice the information required in paragraph (2) of this subsection.

(g) Permit required for surface disposal. Except in the case of on-site disposal that meets the requirements of subsection (e)(2) of this section, no person may dispose of oil and gas NORM waste by burying it or by applying it to and mixing it with the land surface without first obtaining a permit under §3.8 of this title (relating to Water Protection). The provisions of this subsection apply in the case of permits for such surface or near- surface disposal methods.

(1) Standards for permit issuance. The Commission shall issue a [ A ] permit to dispose of oil and gas NORM waste under §3.8 of this title (relating to Water Protection) [ may be issued ] only if the commission, or its designee, determines that the subject oil and gas NORM waste will be disposed of in a manner that protects [ is protective of ] public health, safety, and the environment. Any permit to dispose of oil and gas NORM waste issued pursuant to §3.8 of this title (relating to Water Protection) shall contain construction and operating requirements that are reasonably necessary to protect public health, safety, and the environment. In addition, the Commission shall issue a permit for burial of oil and gas NORM waste [ may be issued ] only if, prior to burial, the oil and gas NORM waste has been treated or processed so that the radioactivity concentration [ of Radium-226 and 228 ]does not exceed 30 pCi/g Radium 226 and 228 or 150 pCi/g of any other NORM radionuclide [ the background radioactivity concentration by more than five pCi/g ]. The Commission shall issue a [ A ] permit to dispose of oil and gas NORM waste by applying it to and mixing it with the land surface [ may be issued ] only if, after such application and mixing, the radioactivity concentration in [ of Radium-226 and 228 over ] the area where the oil and gas NORM waste was applied and mixed will not exceed 30 pCi/g Radium 226 and 228 or 150 pCi/g of any other NORM radionuclide [ the background radioactivity concentration by more than five pCi/g ].

(2) NORM information. In addition to the application requirements of §3.8 of this title (relating to Water Protection), an applicant [ application ] for surface or near-surface disposal of oil and gas NORM waste shall include the information specified in this paragraph. The commission or its designee may require the applicant to provide any such additional information as may be necessary to show that the proposed disposal will protect public health, safety, and the environment.

(A) The applicant [ application ] shall describe the physical nature (i.e., pipe scale, contaminated soil, basic sediment, pumps, or valves) of the oil and gas NORM waste to be disposed of.

(B) The applicant [ application ] shall state the total volume of oil and gas NORM waste to be disposed of or the proposed rate of oil and gas NORM waste disposal.

(C) If the oil and gas NORM waste has been treated or processed to reduce the radioactivity concentration under a specific license issued by the Texas Department of Health, the applicant [ application ] shall state the maximum measured radioactivity level (in pCi/g of Radium-226 and 228, or in µR/hr [ microroentgens/hr ]) of the treated or processed waste. If the oil and gas NORM waste will be treated or processed at the disposal site to reduce the radioactivity concentration, the applicant shall [ application must ] state the maximum measured radioactivity level (in pCi/g of Radium-226 and 228, and any other NORM radionuclide , or in µR/hr [ microroentgens/hr ]) of the waste prior to treatment or processing.

(D) The applicant [ application ] shall include the background radioactivity concentration (in pCi/g of Radium-226 and 228) and activity level in µR/hr of the disposal area.

(E) The applicant [ application ] shall describe the method(s) to be used to control dust from the oil and gas NORM waste during disposal.

(F) The applicant [ application ] shall include written authorization from the surface owner, if different from the applicant, for disposal of oil and gas NORM waste on his or her property.

(3) Notice requirements. The applicant shall give notice [ Notice ] of an application for a permit to dispose of oil and gas NORM waste under this subsection [ shall be provided ] as required in §3.8 of this title (relating to Water Protection) and such notice shall include the information required in paragraph (2)(A)-(E) of this subsection.

(h) Recordkeeping. A person shall retain records [ Records ] relating to the radiation survey of equipment and the disposal of oil and gas NORM waste [ shall be retained ] for at least three years after the date of disposal and include at least 2 consecutive radiation surveys. The operator shall provide a report to the Commission listing equipment contaminated by NORM above 50 µR/hr. Such records shall include the information specified in this subsection and subsection (b)(2) of this section .

(1) Generation. The operator of the lease, unit, or facility at which oil and gas NORM waste was generated shall maintain records that include:

(A) the identity of the property where the oil and gas NORM waste was generated, including the commission district; field; lease, unit, or facility; and producing formation, if known;

(B) the identity of the facility, site, or well where the oil and gas NORM waste was disposed of;

(C) the physical nature (i.e., pipe scale, contaminated soil, basic sediment, pumps, or valves) of the oil and gas NORM waste;

(D) the volume of oil and gas NORM waste the person disposed of at that facility, site, or well; and

(E) the radioactivity level(s) of the oil and gas NORM waste (in pCi/g of Radium-226 and 228 and any other NORM radionuclide , or in µR/hr [ microroentgens/hr ]).

(2) Disposal. Each person who disposes of oil and gas NORM waste shall maintain records that include the identity of the operator of the lease, unit, or facility at which the oil and gas NORM was generated as well as the information required under paragraph (1) of this subsection.

(3) Extension during investigation. Any documents or records that contain information pertinent to the resolution of any pending regulatory enforcement proceeding shall be retained beyond any three-year period specified in this subsection until the resolution of the proceeding.

(4) Examination and reporting. Any person who keeps records required by this subsection shall make the records available for examination and copying by the commission, or its designee, during reasonable working hours. Upon request of the commission, or its designee, the person who keeps the records shall file such records with the commission.

(i) Inspection. The commission or its representatives shall have access to properties subject to the requirements of this section as provided in Texas Natural Resources Code, Title 3.

(j) Penalties.

(1) Penalties. A person who violates [ Violations of ] this section may be subject [ the person ] to the penalties and remedies specified in the Texas Natural Resources Code, Title 3.

(2) Certificate of compliance. The commission may revoke the certificate of compliance for any well [ may be revoked ] in the manner provided in §3.68 of this title (relating to Pipeline Connection; Cancellation of Certificate of Compliance; Severance).

(k) Alternatives. On a case-by-case basis, the commission may approve alternatives to the provisions of this section [ may be approved by the commission ] for good cause if it is demonstrated to the commission's satisfaction that the alternatives protect [ are protective of ] public health, safety, and the environment. A proposed alternative must be submitted in writing and approved by the commission.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on January 25, 2002.

TRD-200200473

Mary Ross McDonald

Deputy General Counsel

Railroad Commission of Texas

Proposed date of adoption: May 9, 2002

For further information, please call: (512) 463-7033


Part 2. PUBLIC UTILITY COMMISSION OF TEXAS

Chapter 26. SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS SERVICE PROVIDERS

Subchapter P. TEXAS UNIVERSAL SERVICE FUND

16 TAC §26.403

The Public Utility Commission of Texas (commission) proposes amendments to §26.403, relating to the Texas High Cost Universal Service Plan (THCUSP), as it concerns the adjustment for basic local telecommunications service provided solely and partially through the purchase of unbundled network elements (UNEs). In 1999, as part of Senate Bill 560 (SB 560), the Legislature enacted Public Utility Regulatory Act (PURA) §56.026 to ensure that eligible telecommunications providers (ETPs) receive prompt and efficient disbursement for provisioning basic local telecommunications services in rural areas from the universal service fund (USF). Specifically, under PURA §56.026(c)(2), the Legislature granted the commission the authority to reduce an electing company's amount of disbursement if its local end user customer switches to another local service provider that serves the customers solely or partially through the use of UNEs provided by the electing company. The commission is required to establish an equitable allocation formula for this disbursement. Accordingly, the commission initiates this rulemaking proceeding to establish an equitable formula to ensure that all residents within the state have access to affordable basic local telecommunications service. The proposed amendments are comprised of substantive revisions to §26.403(e)(3)(C). Project Number 24526 is assigned to this proceeding.

Substantive changes to rule language

Proposed §26.403(e)(3)(C)(i)-(iv) amends the adjustment for service provided solely and partially through UNEs. Specifically, the proposed amendments create a competitively neutral market in rural Texas for provisioning basic local telecommunications service provided solely or partially through the purchase of UNEs.

Lori Cobos, Policy Analyst, Policy Development Division, has determined that for each year of the first five-year period the proposed section is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the section. No reductions in costs to the state or local governments are estimated as a result of enforcing this section as proposed. No loss or increase in revenue to the state or local governments are estimated as a result of enforcing and administering this section as proposed.

Ms. Cobos has determined that for each year of the first five years the proposed section is in effect the public benefit anticipated as a result of enforcing the section will be to provide a sharing mechanism that permits all residents of the state to obtain affordable basic local telecommunications service needed to communicate with other residents, businesses, and governmental entities. There will be no effect on small businesses or micro-businesses as a result of enforcing this section.

Ms. Cobos has determined that there is minimal anticipated economic cost to persons who are required to comply with the section as proposed. The anticipated economic effect on companies will consist of administrative, legal, and miscellaneous costs associated with implementing the proposed section.

Ms. Cobos has also determined that for each year of the first five years the proposed section is in effect there should be no effect on a local economy, and therefore no local employment impact statement is required under Administrative Procedure Act §2001.022.

The commission staff will conduct a public hearing on this rulemaking, if requested under Government Code §2001.029, at the commission's offices located in the William B. Travis Building, 1701 North Congress Avenue, Austin, Texas 78701, beginning at 10:00 a.m. in the Commissioners' Hearing Room on Thursday, April 4, 2002. The request for public hearing must be received within 30 days after publication.

Comments on the proposed amendments (16 copies) may be submitted to the Filing Clerk, Public Utility Commission of Texas, 1701 North Congress Avenue, P.O. Box 13326, Austin, Texas 78711-3326, within 30 days after publication. Reply comments may be submitted within 45 days after publication. Comments should be organized in a manner consistent with the organization of the proposed amendments. The commission invites specific comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed section. The commission will consider the costs and benefits in deciding whether to adopt the proposed amendments. All comments should refer to Project Number 24526.

In addition to the general comments, the commission seeks comment on whether the proposed amendments to the UNE sharing mechanism in §26.403(e)(3)(C)(i)-(iv) are equitable. Specifically, are the proposed amendments competitively and technologically neutral?

These amendments are proposed under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998, Supplement 2002) (PURA), which provides the Public Utility Commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction; specifically, PURA §56.021 which requires the commission to adopt and enforce rules requiring local exchange companies to establish a universal service fund; §56.023 which requires the commission to adopt rules for the administration of the universal service fund; and §56.026 which permits the commission to establish an equitable allocation formula for the disbursement of universal service funds if a local end user customer of an electing company switches to another local service provider that provisions service solely or partially through UNEs.

Cross Reference to Statutes: Public Utility Regulatory Act §§14.002, 56.021- 56.028

§26.403.Texas High Cost Universal Service Plan (THCUSP).

(a) - (d) (No change.)

(e) Criteria for determining amount of support under THCUSP. The TUSF administrator shall disburse monthly support payments to ETPs qualified to receive support pursuant to this section. The amount of support available to each ETP shall be calculated using the base support amount available as provided under paragraph (1) of this subsection and as adjusted by the requirements of paragraph (3) of this subsection.

(1) - (2) (No change.)

(3) Calculating amount of THCUSP support payments to individual ETPs. After the monthly base support amount is determined, the TUSF administrator shall make the following adjustments each month in order to determine the actual support payment that each ETP may receive each month.

(A) - (B) (No change.)

(C) Adjustment for service provided solely or partially through the purchase of unbundled network elements (UNEs). If an ETP provides supported services over an eligible line solely or partially through the purchase of UNEs, the THCUSP support for such eligible line may be allocated between the ETP providing service to the end user and the ETP providing the UNEs according to the methods outlined below.

(i) ETP provisioning service solely [ Soley ] through UNEs. An ETP serving an end user solely through UNEs purchased from another ETP shall receive the lesser of the available THCUSP support or the amount of the appropriate retail cost additive.

[(I) USF cost > (UNE rate + retail cost additive (R)) >revenue benchmark (RB). USF support should be explicitly shared between the ETP serving the end user and the ILEC selling the UNEs in the instance in which the area-specific USF cost/line exceeds the sum of (combined UNE rate/line + R), and the latter exceeds the RB. Specifically, the ILEC would receive the difference between USF cost and (UNE rate + R), while the ETP would receive the difference between (UNE rate + R) and RB. Splitting the USF support payment in this way allows both the ILEC and the ETP to recover, on average, the costs of serving the subscriber at rates consistent with the benchmark. Moreover, this solution is competitively neutral in an additional respect: the ILEC, as the carrier of last resort (COLR), is indifferent between directly serving the average end user and indirectly doing so through the sale of UNEs to a competing ETP. Also, facilities- based competition is encouraged only if it is economic, i.e., reflective of real cost advantages in serving the customer; or]

[(II) USF cost > RB > (UNE rate + R). The ILEC would receive the difference between USF cost and RB. In this case, where USF cost > RB > (UNE rate + R), giving (USF cost - RB) to the ILEC is necessary to diminish the undue incentive for the ETP to provide service through UNE resale, and to lessen the harm done to the ILEC in such a situation. Allowing the ILEC to recover (USF cost-RB) would minimize financial harm to the ILEC; or]

[(III) (UNE rate + R)> USF cost > RB. The ETP would receive the difference between USF cost and RB. Where (UNE rate + R)> USF cost > RB, giving (USF cost - RB) to the ETP is necessary to diminish the undue incentive for the ETP not to serve the end user by means of UNE resale. Allowing the ETP to recover (USF cost -RB) would minimize financial harm to the ETP.]

(ii) ETP provisioning service partially through UNEs. An ETP serving an end user partially through UNEs purchased from another ETP shall receive the lesser of the available THCUSP support or the amount of the appropriate retail cost additive, plus a pro rata share of any THCUSP support in excess of the retail cost additive. THCUSP support in excess of the retail cost additive shall be apportioned to the ETP serving the end user based upon the relative percentage of those UNEs that are self-provisioned. For purposes of this pro ration, the UNE costs for each wire center shall be based upon the HAI model costs for the following five UNEs: loop, line port, end-office usage, signaling, and transport. [ Partially through UNEs. For the partial-provision scenario, THCUSP support shall be shared between the ETP and the ILEC based on the percentage of total per-line cost that is self-provisioned by the ETP. Cost-category percentages for each wire center shall be derived by adding a retail cost additive and the HAI model costs for five UNEs (line, line port, end office usage, signaling, and transport). The ETP's retail cost additive shall be derived by multiplying the ILEC-specific wholesale discount percentage by the appropriate (residential or business) revenue benchmark. ]

(iii) ETP providing UNEs. The ETP providing UNEs to another ETP shall receive the difference, if any, between the total available THCUSP support amount and the THCUSP support amount allocated to the ETP serving the end user.

(iv) ETP retail cost additive. For the purposes of clauses (i) and (ii) of this subparagraph, the ETP's retail cost additive shall be derived by multiplying the ILEC-specific wholesale discount percentage by the appropriate (residential or business) revenue benchmark.

(f) - (g) (No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on January 25, 2002.

TRD-200200483

Rhonda G. Dempsey

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: March 10, 2002

For further information, please call: (512) 936-7308


Part 6. TEXAS MOTOR VEHICLE BOARD

Chapter 103. GENERAL RULES

16 TAC §103.14

The Texas Motor Vehicle Board of the Texas Department of Transportation proposes an amendment to §103.14, General Rules, concerning the procedures for manufacturers to establish ownership of franchised dealerships in Texas.

The proposed change to §103.14(b) will clarify that a manufacturer or distributor who holds an interest in or controls a dealership, pursuant to §5.02C(d) of the Texas Motor Vehicle Commission Code (art. 4413(36), Texas Civil Statutes), may sell the dealership to an entity owned or controlled by the manufacturer/distributor in accordance with §103.14(h). Such clarification of §103.14(b) is necessary to expand the number of candidates eligible to purchase such dealerships.

Other changes to this section involve amending references in the current rule to §5.02C of the Texas Motor Vehicle Commission Code. In the most recent legislative session, a new subsection (e) was added to §5.02C. Therefore, the existing subsection numbers were adjusted to reflect this addition.

Brett Bray, Director, Motor Vehicle Division, has determined that for the first five-year period the proposed sections are in effect, there will be no fiscal implications for state or local government as a result of enforcing or administering the sections.

Mr. Bray has also determined that for each year of the first five years the amendments are in effect the anticipated public benefit will be increased clarification for manufacturers and distributors regarding the necessary requirements to obtain a license to own, operate, or control a dealership pursuant to the terms of §5.02C of the TMVC Code. There will be no effect on small businesses and no anticipated significant economic cost to persons required to comply with the rule as proposed. Mr. Bray has also certified that there will be no impact on local economies or overall employment as a result of enforcing or administering the sections.

Comments (16 copies) may be submitted to Mr. Brett Bray, Director, Motor Vehicle Division, Texas Department of Transportation, P.O. Box 2293, Austin, Texas 78768-2293, (512) 416-4899. The Motor Vehicle Board will consider adoption of this proposed rule at its meeting on April 25, 2002. The deadline for receipt of comments on the proposed new rule is 5:00 p.m. on April 5, 2002.

The amendment is proposed under the Texas Motor Vehicle Commission Code §3.06, which provides the Board with authority to adopt rules as necessary and convenient to effectuate the provisions of the Act and to govern practice and procedure before the agency.

Motor Vehicle Commission Code §5.02C is affected by the proposed new rule.

§103.14.Manufacturer Ownership of Franchised Dealer; Good Cause Extension; Dealer Development.

(a) An application for a new motor vehicle dealer's license in which a manufacturer or distributor, as those terms are defined in the Texas Motor Vehicle Commission Code, owns any interest in or has control of the dealership entity must be submitted to the Motor Vehicle Division no later than 30 days before the opening of the dealership, close of the buy-sell agreement, or the expiration of the current license, whichever is the case.

(b) If a manufacturer or distributor applies for a new motor vehicle dealer's license in which the manufacturer or distributor holds an ownership interest in or has control of the dealership entity under the terms of Texas Motor Vehicle Commission Code §5.02C(d), the license application must contain a sworn statement from the manufacturer or distributor that the dealership was purchased from a franchised dealer and is for sale at a reasonable price and under reasonable terms and conditions, and that the manufacturer or distributor intends to sell the dealership to a person not controlled or owned by the manufacturer or distributor within 12 months of acquiring the dealership, except as provided in subsection (h) of this section .

(c) A request for an extension of the initial 12 month period for manufacturer or distributor ownership or control of a new motor vehicle dealership in accordance with Texas Motor Vehicle Commission Code §5.02C(d) must be submitted in accordance with subsection (a) of this section, along with a complete application to renew the new motor vehicle dealer's license. The request must contain a detailed explanation, including appropriate documentary support, to show the manufacturer's or distributor's good cause for failure to sell the dealership within the initial 12 month period. The Director of the Motor Vehicle Division, or his designee, will evaluate the request and determine whether the license should be renewed for a period not to exceed 12 months or deny the renewal application. If the renewal application is denied, the manufacturer or distributor will be afforded an opportunity to request a hearing on the denial and, if requested, a hearing will be initiated in accordance with Texas Motor Vehicle Commission Code §3.08.

(d) Requests for extensions after the first extension is granted, as provided in Texas Motor Vehicle Commission Code §5.02C (g) [ (f) ], must be submitted at least 120 days before the expiration of the current license. Upon receipt of a subsequent request, the Board will initiate a hearing in accordance with Texas Motor Vehicle Commission Code §3.08 at which the manufacturer or distributor will be required to show good cause for the failure to sell the dealership. The manufacturer or distributor has the burden of proof and the burden of going forward on the sole issue of good cause for the failure to sell the dealership.

(e) The Board will give notice of the hearing described in subsection (d) of this section to all other dealer licensees holding franchises for the sale and service or service only of the same line-make of new motor vehicles who are located in the same county in which the dealership owned or controlled by the manufacturer or distributor is located or in an area within 15 miles of the dealership owned or controlled by the manufacturer or distributor. Such dealers, if any, will be allowed to intervene and protest the granting of the subsequent extension. Notices of intervention by dealers afforded a right to protest under Section 5.02C (g) [ (f) ] of the Texas Motor Vehicle Commission Code must be filed with the Docket Clerk within 15 days of the date of mailing of the notice of hearing, with a copy provided to the manufacturer or distributor. Failure to file a formal notice of intervention within the specified time period will result in the disallowance of the intervention.

(f) A hearing under subsections (d) and (e) of this section will be conducted as expeditiously as possible, but not later than 120 days after receipt of the subsequent request for extension from the manufacturer or distributor. A hearings officer will prepare a written decision and proposed order as soon as possible, but not later than 60 calendar days after the hearing is closed. The new motor vehicle dealer's license that is the subject of the hearing will continue in effect until a final decision is rendered on the request for a subsequent extension.

(g) The procedure described in subsections (d) - (f) of this section will be followed for all extensions requested by the manufacturer or distributor after the initial extension.

(h) An application for a new motor vehicle dealer's license in which a manufacturer or distributor owns any interest in the dealership entity under the terms of Texas Motor Vehicle Commission Code § 5.02C (f) [ (e) ] must contain sufficient documentation to show the following:

(1) that the dealer development candidate is part of a group of persons who have historically been underrepresented in the manufacturer's or distributor's dealer body or is an otherwise qualified person who lacks the resources to purchase a dealership outright;

(2) that the manufacturer or distributor is in a bona fide relationship with the dealer development candidate;

(3) that the dealer development candidate has made a significant investment in the dealership, subject to loss;

(4) that the dealer development candidate has an ownership interest in the dealership; and

(5) that the dealer development candidate operates the dealership under a plan to acquire full ownership of the dealership within a reasonable time and under reasonable terms and conditions.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on January 18, 2002.

TRD-200200285

Brett Bray

Director, Motor Vehicle Board

Texas Motor Vehicle Board

Earliest possible date of adoption: March 10, 2002

For further information, please call: (512) 416-4899