Vol. 140, No. 32 — August 12, 2006

Restricted Components Regulations

Statutory authority

Explosives Act

Sponsoring department

Department of Natural Resources

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

The Explosives Regulatory Division (ERD) of Natural Resources Canada (NRCan) is responsible for the administration of Canada's Explosives Act (the Act) and Explosives Regulations. Amendments to the Act contained in the Public Safety Act, 2002 include regulation-making provisions to ensure the security of explosives and restricted components of explosives (restricted components). The Toronto area terrorist plot to use ammonium nitrate (AN) to build bombs which was foiled in early June of 2006 is a strong indication that regulatory controls are urgently needed to ensure that restricted components are protected from future attempts of acquisition for terrorist and criminal use.

A number of chemicals that are neither defined nor regulated as explosives can be readily used by terrorists and criminals to fabricate bombs. The two most significant bombing incidents in the United States in the 1990s involving New York City's World Trade Center and Oklahoma City's Murrah Federal Building, as well as the deadly attacks on the London mass transit system of last year, all involved explosives made from some of the chemicals that are targeted to be regulated as restricted components under these proposed Regulations.

The subject of restricted components was studied by the U.S. National Research Council (NRC) whose 1998 report Containing the Threat from Illegal Bombings contains a list of such chemicals. From a relatively long list they developed a short list of chemicals (nine) which appeared to pose the greatest risk and should therefore be considered for controls. The criteria that were used to condense this list were as follows:

• the chemical should be reasonably adaptable and available for making large bombs;
• the chemical should be an essential component in an explosive system with a potential for significant use as measured in deaths, injuries and property damage; and
• the chemical should be a critical precursor, i.e. one not easily replaced.

Although this was a U.S. study, the American investigators consulted internationally during the course of their work. Its conclusions also apply to Canada, as industry, products and markets in the two countries are similar.

In addition to the U.S. referenced study, an evaluation of historical data shows that the following nine chemicals have been routinely used in bomb and explosives fabrication and for that reason would become restricted components under the proposed Regulations:

• AN in solid form at a concentration of 28 to 34% nitrogen;
• nitric acid at a concentration of at least 68%;
• nitromethane;
• hydrogen peroxide at a concentration of at least 30%;
• potassium nitrate;
• sodium nitrate;
• potassium chlorate;
• sodium chlorate; and
• potassium perchlorate.

The proposed Regulations have been designed to protect restricted components from terrorist and criminal acquisition in a number of important ways without introducing burdensome impacts on legitimate commerce and end users such as farmers.

The key components of this regulatory framework for sellers of restricted components are

• enrolment on the list of sellers of restricted components;
• maintenance of a list of employees who have access to restricted components;
• examination of purchaser identification prior to sale;
• maintenance of detailed sales records;
• provision of secure storage;
• weekly inspection of stock to determine if there has been tampering, theft or loss and the reporting of thefts and attempted thefts to the Chief Inspector of Explosives and to local police; and
• denial of sale if there is a reason to believe the product will be used for a criminal purpose and reporting instances when a sale is denied to the Chief Inspector of Explosives and to local police.

As AN is widely used throughout Canada and is at greatest risk to be used for terrorist and criminal purposes, there are additional security requirements for sellers of this particular restricted component. These include

• implementation of a key control program for locks securing stocks;
• provision of security lighting for major points of access;
• provision of a safety and security plan;
• ensuring that the means of shipment is securely locked;
• inspection of every incoming shipment to ensure there has been no tampering or loss of product;
• reconciliation of all incoming and outgoing quantities;
• denial of sale if the amount to be purchased is not proportional to the needs or if there is reason to believe that the product will be used for a criminal purpose and reporting instances when a sale is denied to the Chief Inspector and local police;
• using shippers who operate in conformance with the requirements of the Transportation of Dangerous Goods Act;
• informing purchasers in writing of storage security requirements and their responsibility to report any loss, tampering or theft; and
• provision of an annual inventory report to the Chief Inspector.

Alternatives

In the development of the policy for controlling sales of restricted components, several alternatives were considered.

• Status quo. Because the current program is wholly based on self-regulation, this was not considered adequate, as restricted components such as AN are inexpensive, readily available and easily converted into a powerful explosive. Furthermore, restricted components are often used by terrorists (Irish Republican Army bombings in the United Kingdom, the Oklahoma City bombing, the Bali bombing and the Toronto terrorist plot foiled in June of 2006). Many chemical industry groups abide by well-known codes of practice but these refer to the safety of the chemical itself and many security aspects are missing from those codes. Finally, the uncertainty of securing full cooperation for all restricted components combined with the level of residual security risks to the safety of the Canadian public has deemed this alternative to be unreasonable.
• Imposition of tight controls, such as licensing both buyer and seller. This would be a costly and burdensome requirement. Considerable opposition from legitimate end-users such as the farming community would be guaranteed. The effort required would be disproportionate in relation to the marginal improvement in security obtained.
• Prohibit the sale of AN. This is an important fertilizer. With nearly 180 000 tonnes used in Canada in 2004, banning it would cause major dislocation to suppliers and end-users, as well as extra cost, as no other alternative chemical is available.

It is felt that the measures reflected in the proposed Regulations strike the appropriate balance of providing adequate security without unreasonable dislocation.

Benefits and costs

NRCan is committed to ensuring public safety without burdening industry and end-users with unnecessary costs and restrictions. These amendments will not significantly increase costs for the affected industry, as consultation with the Canadian Fertilizer Institute (CFI), the Canadian Association of Chemical Distributors (CACD) and the Canadian Chemical Producers Association (CCPA) has determined that most have the security measures in place and only require formalization of existing systems. The enrolment requirements will only necessitate minimal upgrades to record-keeping processes and physical storage measures. The proposed Regulations will require that anyone who sells, acquires for sale or possesses for sale restricted components enroll with the ERD, comply with security measures, ensure accurate record-keeping practices and provide an annual report (ammonium nitrate only). The CFI has agreed that the projected compliance costs are reasonable and has estimated the total financial impact to their members at approximately $120,000 one-time start-up costs, plus around $20,000 annually. The cost to NRCan is estimated as $710,000 over five years, including start-up.

Consultation

ERD has been consulting with stakeholders since the middle of 2002 while it was in the policy development phase. In May 2004, a survey was sent to all relevant stakeholders through the CFI, CACD, CCPA, Synthetic Organic Chemical Manufacturers Association (SOCMA), Forest Products Association in Canada (FPAC), Canadian Pulp and Paper Association (CPPA) and to racing fuel distributors. A total of 284 companies were surveyed with a response rate of 40%. The purpose of the survey was to inform as many stakeholders as possible and to understand how the restricted components are available in Canada (e.g. format). There have been no major objections raised. Various stakeholders came forward and expressed a desire to be consulted throughout the development. Since this time, ERD has met the following stakeholder groups:

Both the CFI (for AN) and AET (for sodium chlorate) are currently working on the development of industry Codes of Practice. At this time, the CFI code for AN is near completion and a large portion is reflected in these proposed Regulations.

Formal notification of these regulatory proposals will be conducted through publishing in Part I of the Canada Gazette, ERD's Web site (http://nrcan.gc.ca/mms/explosif/index.htm), as well as through communications with relevant associations and groups such as the CFI, CCPA and CACD. ERD is committed to conducting its regulatory consultations in a manner that encourages a positive engagement with the affected industries and stakeholders, while ensuring integrity and transparency.

Compliance and enforcement

Enrolment and annual reporting procedures and services will be provided by NRCan. This will be supported through compliance inspections conducted by the Canadian Food Inspection Agency in partnership with ERD. ERD's Enforcement and Compliance Policy, a public document, will be revised to identify the range of corrective actions that may be used to address non-compliance with respect to restricted components. The Chief Inspector would have the right to suspend a seller's enrolment where the Act or the Regulations are contravened. The Chief Inspector may cancel a seller's enrolment in situations where there has been a repeat history of non-compliance with the Act and Regulations or where the seller jeopardizes the security or safety of the public. In both cases the seller must be notified in writing and be given a reasonable opportunity to give reasons as to why suspension or cancellation is unwarranted. In cases where the Chief Inspector chooses to suspend or cancel a seller's enrolment, the seller may submit a request to the Minister within 15 days to review that decision. In absence of valid enrolment, the seller cannot sell and if found to be in violation, may be charged under the Act.

Contact

Viviane Dewyse, Senior Inspector of Explosives – Acting Manager, Ontario Region, Explosives Regulatory Division, Natural Resources Canada, 1431 Merivale Road, Ottawa, Ontario K1A 0G1, 613-948-5183 (telephone), 613-948-5195 (fax), vdewyse@NRCan.gc.ca (email).

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to paragraphs 5(a.31) (see footnote a), (i.1) (see footnote b) and (m) (see footnote c) of the Explosives Act, proposes to make the annexed Restricted Components Regulations.

Interested persons may make representations concerning the proposed Regulations within 90 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Viviane Dewyse, Senior Inspector of Explosives, Acting Manager, Ontario Region Explosives Regulatory Division, Natural Resources Canada, 1431 Merivale Road, Ottawa, Ontario K1A 0G1 (tel.: 613-948-5183; fax: 613-948-5195; email: vdewyse@nrcan-rncan.gc.ca).

Ottawa, August 1, 2006

MARY O'NEILL
Assistant Clerk of the Privy Council

[32-1-o]

Footnote a

S.C. 2004, c. 15, s. 37(1)

Footnote b

S.C. 2004, c. 15, s. 37(5)

Footnote c

S.C. 2004, c. 15, s. 37(6)

NOTICE:
The format of the electronic version of this issue of the Canada Gazette was modified in order to be compatible with hypertext language (HTML). Its content is very similar except for the footnotes, the symbols and the tables.

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